A Comment -- General Comments From an Expert

A Commentary

What's market telling you right now? It's decently positioned. Canadian market hasn't gone up a lot over the last 5 years. So Canada has more upside than the US, because of valuations. In the current decade, energy and materials represent only 25% of the TSX, a decrease. TSX is neglected among the world indices. Valuations are very attractive. Since 2010, S&P has done 3x better than the Canadian side. Financials are the biggest sector, but are still trading at lower valuations than the norm. International investors have turned their backs on Canada in energy. So this is an opportunity.

Market Outlook He thinks we are into the correction part of "sell in May and go away". He is watching long term bond yields, if 10 year yields drop below 2.35% it is a sign that investors are heading for the exits. A break down could take the yield down to 2.00% -- a big boom for bond holders.

Price to book It compares the net worth to the value of the company. A cyclical company may trade below book value. Software companies trade a huge multiples. When compared to ROE, it has some positive influence on share price value.

The Dow was down today, though the US will lift metal tariffs against Canada and Mexico as the China-US trade war continues. He can't keep track. It's worrisome. Talks have stalled. Be patient. The market can't keep going up after Christmas. The trade war won't go on forever. Will interest rates still low? Stock market will stabilize, given low rates. Good earnings in Q1 including from Apple, but there is now the reality of American companies passing tariff costs onto their America customers. Apple's valuation is attractive now. Each year there are 3-5 pullbacks, so pullback like this should be expected, and each one is a buying opportunity.

Market. Sustainable Investing, or Socially Responsible Investing, involves soul searching and doing less evil, getting rid of the worst companies as well as doing more good. 'Doing more good' involves renewable energy, water infrastructure, and organic food. Sustainable investing is just managing your money. Definitions of what companies qualify vary. You may invest in companies that will benefit from a low carbon economy. Look at what you buy and understand the companies you invest in.

Green Technology Recommendation. He does not like picking specific technologies because there is a lot of change where something better comes along in the green sector. He would suggest an ETF (e,g, TAN-N) but for a stock he would go with FSLR-Q or BLDP-T. BLDP-T had disappointing earnings where they re-jigged their factory. There is a new model solar panel coming out early next year. There could be a really good buying opportunity.

Market Outlook - Consumers need to understand that if tariffs on products from China are increased you are going to pay more on many products as a lot of stuff comes form there. Private Equity seems to be an in vogue thing now. There is a trend now for for smart money to take public companies that are undervalued private. On the pipeline and energy and services global markets have kind of ignored Canada as they don't want to deal with the current regulatory environment and Government but that is changing over time as we see changes on Government at the Provincial level and probably at the Federal level. So more pro-business policies are coming.

Market Outlook The market is trying to figure out its next trading level. With the change in interest rates and earnings, the market appears to be forming a double top. Now with US long term bond rates going down, the expectation is for a US Fed rate cut in September. The economy appears to be slowing down. Q1 earnings have been okay and the market is losing momentum. He is cautious. The trade war between China and the US and the amount of government debt are the greatest headwinds. Inflation could re-emerge when no one is expecting it.

IPOs? He does not participate in IPOs in general. The Canadian IPOs have not done particularly well.

Near-term, choppiness will continue. He expected a standard 10% correction last September, but in fact a 4-year cycle reset was happening which was the sharp pullback through Dec. 24. Early-2019 was the time to buy stocks, expecting a strong rally. But for the past three weeks he's been warning clients of a 5-10% correction for one or two months, like October-November 2018. Then, there will be a strong recovery. We have more a dip to come to as low as 2,775 on the S&P. Gold: he's been liking it since last summer when it bottomed below $1,200, then he was cautious gold in February-March 2019. Even India-Pakistan tensions didn't budge gold. Now, the smart money is being gold; also gold's seasonality is the summer.

Neither China nor the US benefit from the current tariffs and trade war, and the whole thing is complex. Last week was surprising, since the market expected a deal. True, it was unrealistic to expect all trade issues to be resolved in a single agreement. Trump's new tariffs don't kick in for a few weeks. Who knows what will happen. Monitor it. The strong recovery since December was due to an expected trade deal; the US Fed turned dovish; US data is strong; and earnings were much stronger than expected. So, one factor has done south and we'll see how that effects the three others

This market is bouncing along the rim like the Raptors' buzzer-beater and it will fall through the hoop and score. This spring, company earnings beat the street in the U.S. and exceeded expectations, which is good. Trump lives and dies by the Dow's performance to get re-elected in 2020. Surprisingly, the TSX has been quiet compared to New York. Remember: America buys far more from China than vice versa. China will devalue the yuan which will stimulate their economy. That'll be interesting to see. The Fed has already taken a lot of treasuries off the book, so it's not the weapon they said it was. Ultimately, the trade war will resolve itself, perhaps not this week.

Will the bubble burst with all this QE worldwide? And your thoughts on inflation? "Burst" is too strong. Rather it will be a slow unwind, as we patch the cracks that appear. He's very concerned. Deflation is happening in tech, but inflation is happening in other areas, which adds to being slightly positive, not massively inflationary or deflationary.

Market. The world expected a US/China deal and it was priced in. Now you have to cut about a third or a half of the rally since December. There is some support around 2810 on the S&P but not a lot of support below that. There is more risk than reward in the markets here. There is no potential deal here in the next days or weeks in his mind. Intellectual property rights are going to be the most difficult issue in the negotiations. The airline industry is a capital intensive industry that does not make a lot of money. WestJet is cheap relative to a lot of other players in the sector. A corporate raider is trying to come in to fix things up.