A Comment -- General Comments From an Expert (A Commentary)

Market. The current rally is being driven by solid fundamentals, part of a global theme and not just a Trump theme. If you look at things that would have been better under Trump, you would have expected domestic manufacturers, smaller companies, etc. would’ve done better, but the Russell 2000 where these companies reside, has really stalled. We are in an expansionary phase and it is a global phenomenon, and is generally good for regions. Europe has done as well or better, post the US election, than what the US has. It is economics, not policy, that is driving the market. You need to look outside Canada for more and more of where your investment dollar goes. There is better growth in the US. Emerging markets have been on fire and their balance sheets are much better. European valuation is 3 or 4 multiple terms lower than the US.

Markets. He is not worried about Trump not being able to get things through. The rally through since the election was based on Trump’s election. There is an issue with him not being able to get three major pillars of his campaigned through, but it has only been 120 days. We will not expect to see the benefits of him for the next three years. He is focusing on global growth internationally at the moment. An increase in oil prices would be bullish in the short term. He is fine with oil in the range of $40 to $53. This range is great for the stock market. He is avoiding energy stocks right now. BP is the only one he owns because of the large dividend. He is overweight technology. He likes small to mid cap names.

Markets. C-N has an economic surprise index. The EU is relatively stable over the last 6 months, but the US has really fallen off a cliff over the last 6 months so there have been far more economic reports that are coming out much worse than expected. The markets are making new highs today. The percentage of stocks that are above their 200 day average is falling, so the breadth of the market is falling. It does not mean you sell today, but that there is some underlying weakness. He wants to be cautious this late in the economic cycle. Credit is driving a lot of potential growth we are having and is masking some of the weaker underlying demographic and other trends that will limit growth for the next couple of decades.

S&P 500 – 100 points higher or 100 points lower first? He was taught never to forecast price and time in the same forecast. But he would say 100 points lower comes first. He is conservative for clients and establishing options positions. He is being more defensive.

Bitcoins. Back to about 2010 when it first started trading, it was worth pennies. We are at 2600 today. There is a bubble here. When it breaks you will get a correction like in 2013, at least 50% and then perhaps it is something to own again. He thinks we will eventually be a paper-currency-less society. This is not a currency. Currencies don’t fluctuate like this.

How to play defensively. Write put options about 10% below market and take a yield of 4%. You have to want to buy the market 10% lower. Energy may not come down that much if markets come down because energy is already down. It is already at a 50 week low. He has been nibbling at the energy sector.

CAD$ vs. Euro. The Euro has been strengthening. With an election in Italy we will likely see anti EU parties. He does not see the CAD$ rallying much and the Euro will likely weaken a little.

Educational Segment. Chart shown of Market Capitalization of the MSCI world metals and mining index vs. capitalization of GOOGL. GOOGL is now worth more than the base metals sector of the entire world. The metals and mining index has been coming down with a lot of it being the Chinese growth story tailing off. Chinese growth is 100% fueled by Chinese debt. China is the real catalyst for the next global downturn. He has been watching Dim Sum Bonds. It is the worst performing bond index in the world.

Market. The market was already poised to head higher before Trump was elected. The trends were already in place. What is interesting is that the Trump bump everyone was looking for i.e. get Long banks and get Short bonds, etc. had a really nice run up until the middle part of the new year, and has subsequently given everything back. People are now very much in a “wait and see” hold pattern with respect to the whole reflation trade. Several sectors are really propelling the S&P 500 narrow rally, the consumer discretionary and technology. The backdrop for technology is really conducive. We are in a period right now where you have inflation falling, real GDP growth accelerating, and that backdrop is about as good as you can get for the technology sector. Inflation is still benign. Technology has now moved up to about 25% of the S&P, which is really, really substantial. People should be rebalancing portfolios now. At some point there is going to be a real reversion trade. He has Short positions now on the broad indexes of Canada and Australia.

US banks versus Canadian and European banks? US banks in general are cheaper, comparing some of the money centred banks like Wells Fargo (WFC-N) and Citi (C-N). On the general outlook, there are some real positive tailwinds, whereas in Canada there are a few headwinds. Also, he would be playing more of the bigger cap money centred type banks, as opposed to regionals. The European side does look good, and there is an ETF iShares MSCI Europe Financial (EUFN-Q) which is a broad composite of European banks. These are banks that have not moved that much. There is a big opportunity in European banks. He would choose banks in the order of 1) European, 2) US and 3) Canada.

EUR/USD *Short*. The euro today is around 1.1257, and has had a really strong move up from 1.05 earlier in the year. This is predicated on the fact that people think Draghi is going to curtail corporate bond buying. Thinks that is going to change. Real economic growth in the US is accelerating, and in Europe he thinks it is topping out. Another wildcard is the Italian election which is coming up, which will cause some consternation in the market.

Market. We are in the middle stages of a secular bull market in the US$. There is a big, big rally coming. Trump pulling out of the climate accord seals the Pax Americana. It shows that America is going to turn inward and is going to focus on itself in getting jobs. This tells him that the run is still strong for the US$ against the back of the world currency.

Market. Technically, the major US equity indices break to new all-time highs, and that generally creates more buying pressure. However, this is a short-term phenomenon. Historically, around the middle of June to the middle of October, there is a correction that happens. On average, the TSE composite reaches a seasonal high around June 9. There are 2 highs for the US market, around June 15 and July 15. From the middle of June to the middle of October, during the last 20 periods, there have been 20 corrections every 3 years, and the average decline during the correction is 14.9% for the S&P 500. That implies that sometimes, from the middle of June right through until the middle of October, you may want to be cautious in the equity markets. Watch the volatility coming up next week. To get a spike in volatility, that is the start of a correction.

Healthcare? The healthcare sector has a lot of things going for it right now. There is currently a big conference in Chicago with lots of news coming out about new products, particularly in the cancer area. Seasonally, healthcare does very well through until about the middle of July. However, look for healthcare providers, such as hospitals stocks, as they are outperforming the healthcare sector. Also, check for healthcare implement providers which are also outperforming the healthcare sector.

[The show was truncated by live coverage of announcemnets by governments regarding softwood lumber].