John Hood, president and portfolio manager at J.C. Hood Investment Counsel

Focus: Options and ETFs
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MARKET OUTLOOK
I have been overweight the U.S. market for several years and continue with that strategy given the pro-business agenda of Trump. Despite high P/E ratios, it is hard to argue with a commitment to lower corporate taxes, encourage the repatriation of off-shore U.S. corporate funds, releasing the U.S. banks from some of the Dodd-Frank constraints and increasing U.S. energy independence, not to mention continuing low interest rates. His mercurial posturing, however, can make it difficult for him to achieve his objectives. In other words, the health-care plan and corporate tax reductions can be sideswiped by his unpredictable policy pronouncements. I continue to hold all U.S. positions; for newer clients, however, I am being cautious by utilizing covered call ETFs on U.S. equities. Similarly, I am using covered call ETFs on Europe rather than unhedged European ETFs like VGK. I have not taken a position as yet with emerging markets but if I did, it would be developed markets.

TOP PICKS

QUESTRADE RUSSELL 1000 EQUAL WEIGHT US HEALTH CARE INDEX ETF HEDGED TO CAD (QRH.TO)
Questrade is a U.S. health care ETF that has selected approximately 80 stocks from the Russell 1000. Unlike some other ETFs in this sector, 65 per cent of this equal weighted ETF are mid-cap stocks. Further, Questrade chopped the fees on all its ETFs by 50 per cent; this one is just 25 bps which is much less that other “smart beta” ETFs at 80 bps. Not held in any accounts but will be added to client accounts.

BMO EUROPEAN HIGH DIVIDEND COVERED CALL HEDGED TO CAD ETF (ZWE.TO)
BMO’s covered call on Europe with a yield approaching 6.5 per cent. Not held.

ENERGY SELECT SECTOR SPDR FUND (XLE)
Energy Select Sector SPDR Fund mega caps Exxon, Chevron, etc. The sector is currently out of favour but is cutting costs plus shale gas. Not held.
 

PAST PICKS: JANUARY 19, 2016

HORIZONS ACTIVE FLOATING RATE BOND ETF (HFR.TO)

• Then: $9.90
• Now: $10.08
• Return: +1.81%
• TR: +4.58%

ISHARES S&P 500 INDEX FUND CAD HEDGED (XSP.TO)

• Then: $21.51
• Now: $27.36
• Return: +27.19%
• TR: +29.50%

BMO COVERED CALL CANADIAN BANKS ETF (ZWB.TO)

• Then: $14.37
• Now: $18.01
• Return: +25.33%
• TR: +34.19%

TOTAL RETURN AVERAGE: +22.76