John Hood, president and portfolio manager at J.C. Hood Investment Counsel Inc.
Focus: Options and ETFs

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MARKET OUTLOOK

In recent weeks, we've been witnessing the unusual circumstance where stocks are beating earnings estimates, but prices have been declining. According to CFR Research's Sam Stoval, 2018 earnings per share (EPS) are projected to climb 23 per cent, well above the 16 per cent forecast from last quarter. So why the stall in prices?

Charles Lieberman said in a column for Bloomberg that some analysts have suggest Trump’s tax are just a one-year, non-recurring event that ought to be discounted, but that clearly is incorrect: this is an ongoing tax relief that significantly increases profits and therefore shaves earnings multiples. The market is now trading at 17-times projected earnings in 2018, which is very reasonable and suggest that markets are in fact undervalued by about 14 per cent.The geopolitical situations is potentially volatile, but the U.S. and China this morning called off the "trade war" and markets rallied strongly. So I'm as always bullish on the U.S. and the most pro-business administration since Ronald Reagan's.

In Canada, one would have to look very hard to find pro-business policy. My exposure to Canadian assets is at its lowest level in 18 years: neither foreign nor domestic capital is interested in a quagmire of regulations. I do however hold Canadian banks due to their U.S. exposure as well as some small-cap industrials and technology.

TOP PICKS

ISHARES S&P/TSX CAPPED INFORMATION TECHNOLOGY INDEX (XIT.TO)

VANGUARD LARGE-CAP ETF (VV.US)

BMO COVERD CALL CANADIAN BANKS ETF (ZWB.TO)

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
XIT N Y Y
VV N Y Y
ZWB N Y Y

 

PAST PICKS: AUG. 8, 2017

ISHARES S&P/TSX COMPLETION INDEX FUND (XMD.TO)

  • Then: $24.41
  • Now: $25.68     
  • Return: 5%
  • Total return: 7%

VANGUARD FTSE CANADA ALL-CAP INDEX ETF (VCN.TO)

  • Then: $30.84
  • Now: $32.89
  • Return: 7%
  • Total return: 9%

ISHARES S&P/TSX CAPPED INFORMATION TECHNOLOGY INDEX (XIT.TO)

  • Then: $14.87
  • Now: $18.54
  • Return: 25%
  • Total return: 25%

Total return average: 14%

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
XMD N N Y
VCN N N N
XIT N Y Y

 

WEBSITE: www.jchood.com