A Comment -- General Comments From an Expert

A Commentary

There's too much emphasis on negotiations because they'll probably just keep going. Maybe the Chinese are waiting for the elections to get rid of Trump for a better deal.

Markets are currently waiting for clear answers, especially for the trade war. It looks like it will escalate. There could be a good correction if the trade war continues.

Market. There is always some kind of drama. This week it feels like something has changed but he sees it playing out in a normal fashion. There has been a bit of slowing economic data and the ISM Service Non-manicuring data has not moved into contractionary territory but is showing signs of slowing. The cracks in the services side of the economy in the US are a sign that what is happening in the rest of the world does affect the US. There is political impact from the trade drama. Trump is in a weaker negotiating position with the Chinese and this will cause a more protracted trade war with China which will be bad for growth. He is a little more conservative with equities. He is gearing his portfolios for slower growth and lower yields. If you get a moderate pull back in the economy, zero growth or negative growth but not a deep contraction you do get a decoupling and differentiation and you can stock pick better. You might consider REITs as they do better in that environment. He is more into bonds than equities at present.

Thoughts heading into October? Past history says volatile, but historically positive. Summer volatility tends to come to an end. Tend to find the bottoms. Load up on the most cyclical assets, as the next 6 months of the year tend to be the best for stocks. Look for signs of weakness to begin accumulating in sectors you want to be exposed to. Probably not at the low you want to be buying yet. Catalysts include Brexit, jobs report, earnings season. Market gapped lower yesterday, short-term double top. You don't want to just buy the dips. Need something to break out of the gap, and if we don't, we're going lower.

Costco's miss on earnings. Critical time for the consumer economy. He still sees a trend of higher highs, higher lows. Costco tends to do better in the latter half of the year.

Price of gold. Long-term basing pattern broke at $1375. If gold broke below $1400, that would be a good entry point. Volatility isn't going anywhere anytime soon. Could go up to $1800 rather quickly.

Seasonal strength for REITs. Seasonality runs through the third quarter, but peaks around this time of year. Coincides with yields that find a low around this time of year. In the summer, you want to search for anything with a yield, like REITs, consumer staples, and utilities. You should take profits now.

What sector could you buy in October and hold until January or February? How about retail. Stay away from exploration and production, but refiners can do well. Technology. Focus on cyclicals that benefit from the consumer.

Market Outlook He does not understand why people are surprised that the slow in global trade is hurting the market. Global trade relative to GDP has been slowing for 5-6 years, outside of a recession -- the first time in at least 50-60 years. De-globalization is an entrenched situation now. The US does the least amount of global trade. As a generalization, anything that slows down global trade also pushes down commodity prices to the benefit of the US consumer. This is causing a global disruption in manufacturing and commodity prices. He thinks there is more downside yet to come. He recommends investing in quality (strong balance sheets and good cash flows). A favorable trade headline between China and the US would probably cause a symbolic relief rally in the short term. One third of the exports from China goes to Europe, making the US less important to China as they only import about 15% of China's exports.

How do remain calm on days like this? Own companies of quality. If the companies you own have strong assets and balance sheets and some prospect of growth you can ride through the volatility.

The best place to hide is staying where you are. Don't outwit the market when it goes sharply up or down. He's been selling gradually for the past few months to less risky stocks and not piling up cash. Look at wider issues, namely manufacturing issues. How much is down to the GM strike or Boeing, as well as Brexit, Trump's impeachment battle. It will be a lively quarter. Markets hate uncertainty and he's rarely seen this much--Brexit, negative yields, China, etc. Will US interest rates really have much impact? How much will bonds pay? Look at Japan: an aging population with little immigration--the economy declined. In October, Brexit and the election will resolve questions in the UK and Canada.

The 20-year, long-term S&P chart says we are in a secular bull market that should go to the late-2020s/early-2030s. Consider the 1940s-60s, and the 1980s-2000s which were bull runs with peaks and troughs. He sees upside into 2021. He was very bullish gold in April-May, but he's gotten cautious recently. There very well could be a pullback to May levels of $1,400.

WTI price Since 2018, we've seen lower-highs, the start of a downtrend. Mid-2018 WTI peaked at the end of that 4-year economic cycle. He's concerned about all oil in general. He's bearish. Worried it may fall and break support.

Confirmation: As a stock moves higher, you want to see volumes increase to confirm that move. Conversely, when a stock pulls back, you want to see volumes low. Non-Confirmation: The opposite takes place with rising stock prices, but lower volumes which indicates a lack of confidence.

When to get back into the market? As a tech analyst he tries to time the market. He looks at price action, volume and put-call ratio (as a sentiment indicator). Usually, in a year you have an opportunity or two to deploy capital at an entry point. August and June were temporary lows, and he expects the same low to come in mid/late-October when you can add some exposure. You can add, say, 10%, then deploy more later in the fall. The next few months into 2021 will offer a great entry point.