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

Market. He is in a good situation, but is in kind of an unnerving situation where a lot of his portfolio is sitting at 52 week highs. There is a lot of noise about a coming correction, and it has really been a stealth one in certain sectors. He is still committing new fresh capital to these markets, but has a risk management plan in place. Because of that, he is not too worried about being precisely correct or being precisely top or bottom. His Stops do a wonderful job of weighing it out for him.

Markets. It bothers him that Trudeau has no plan in place to balance the budget. He is concerned about the debt in the world. It is unsustainable. Balancing the budget is important to the conservatives. Trump has been wavering on some of his promises. He said he does not like German trade. It is built on export and it does not matter if Trump does not like it. Markets don’t seem to care what he does now. Europe is not fixed because France did not elect an anti-EU leader. Italy has been underperforming the world for decades. This is a problem. Their banks should be a leading indicator as we approach the Italian elections.

Educational Segment. Demographics. You have two natural drivers of growth: Growth from population growth and growth from productivity growth. From the sum of the two we get about 1.3% growth in the world. We have a growth problem, despite all the money being spent in the world. We are in a low growth world. The vast majority of the growth in the world is from China, India and Africa. But China is near finished growing. AFK-N and INDA-N are ETFs he likes. Buy on pullbacks.

Markets. The S&P multiple has come up to 21 from 15 since 2014. Profits are actually down. That is a massive optimism amongst investors. We are as high as just before the tech bubble in the broad market. We are vulnerable to a more severe correction. There are some stocks in some sectors that are attractive. There are opportunities in the tech sector.

The one thing about pipelines is that in 2008 the sector that held up the best was pipelines. The XEG-T for the last 10 years, has not gone up. It has been a downward slope. The mid-stream players and pipelines are the only ones that made any money.

Market. In some instances, such as banking, he prefers the US for investing. Doesn’t own any Canadian banks. US banks are cheaper and have a rising tide with the economy. Rates are going to go up more quickly, as well as having deregulation and tax cuts, etc. He is a little worried that volatility is at ultra-low levels, P/E ratios are at historic highs. The economic growth in the US is pretty good, and Canada is not quite as good. Markets are fairly, fully priced, and he has to spend his day looking for hidden gems. Buying the market broadly is not a great idea right now, given the levels we are at.

Market. We are still seeing the phenomena of a few big stocks such as Amazon, Apple and Facebook leading the market higher. That will probably continue as the power of them is absolutely solid, amazing, and overwhelming.

Market. We have hit all-time record highs in the S&P 500 and the NASDAQ. The TSX has been largely wedged in a sideways move since the beginning of the year, mostly due to energy prices struggling for most of the year and uncertainties in the housing market. US equity valuations look somewhat stretched. The S&P 500 is trading at 18X forward earnings, but in corporate earnings momentum, we have seen a very, very strong slate of corporate earnings coming out, which has kept the market propped up. We need to continue to see that through the next few quarters in order to sustain the valuation in the marketplace. Also, investors and the marketplace are very, very hopeful of tax reform and deregulation coming out of the US. From a global perspective, we are seeing a synchronized economic growth and earnings forecasts, which are trending upwards for the 1^st time since 2010, in all major regions of Europe, Asia, etc. He remains very constructive on cyclicals, which includes the financial sectors, technology, industrials, etc. Continues to be underweight defensive stocks, which would be the consumer staples, telecom type stocks. In his portfolio, he prefers dividend growers versus dividend plays. As rates start tracking upwards, you’ll see dividend payers start to move sideways. You want to see those names that can properly grow dividends over time. The VIX is showing under 10 at this time, a very low number. However, historically a low VIX does not mean markets are going to take a downturn, so he is not too concerned about that.

A defence stock? Some of the go to names would be Raytheon (RTN-N) a missile producer, Lockheed Martin (LMT-N), Northrop Grumman (NOC-N), General Dynamics (GD-N). He has always liked General Dynamics a little bit more because of its diversification. Valuations are very, very similar across the board, and you see that the returns are also very similar over the past year.

Emerging Markets ETF? One of the longer standing ones would be the iShares MSCI Emerging Markets (EEM-N), and his other choice would be the Vanguard Emerging (VWO-N). These have very similar types of performance. Thinks Vanguard might be a little bit cheaper. He likes the emerging markets. (See Top Picks.)

Market. This is the weak period seasonally where liquidity dries up. You want to make sure you have very high conviction in the small caps you own during this period. He has a little more cash than what he would usually have. Although cautious because of the seasonality, long term he is bullish.

Economy. Global growth expectations a year ago were probably a little higher, but if we get global growth of 3% we are doing pretty well. The US seems to struggle to get 2% growth, Canada is less than that, Europe, the UK and Japan have picked up again, over 2%. On the other hand, China seems to be slowing. Believes Canada is the best place to be invested in, because if your assets are in Canada, you will be spending money in Canada. At this point, he would gradually put money to work into the US market.

A top pick in a dividend paying oil stock for a long-term believer in oil? He has 2 stocks that he has as “adds” in his portfolio right now. Vermilion Energy (VET-T), which is a higher yielder, and Cenovus Energy (CVE-T), which is in the doghouse right now. Longer-term, he thinks that Cenovus is a good place to be. Another stock he would suggest would be Canadian Natural Resources (CNQ-T), which has a lot more free cash flow generation coming, and will probably be the fastest dividend grower over the next 2 to-3 years.

Economy. Global growth is still there, but is starting to plateau. Positive global growth is good for commodities. There has been a good deal of growth in 2016, plateauing a bit in 2017. A “steady as she goes” market, and a “steady as she goes” economy. He is not expecting any wild swings up or down. Oil is trading in a range, anywhere from $45-$55 is a good range.

US Treasury Bonds? These are viewed as one of the safest things in the world. Any time there is market uncertainty, there is usually a flock to US Treasury Bonds. The demand is there, which is why you see yields come down from the 2.5%-2.6% level to where they are now. He views that as being a bit overdone.