John Hood, president and portfolio manager, J.C. Hood Investment Counsel Inc.
FOCUS: Options & ETFs
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MARKET OUTLOOK
American business rightly seems to be ignoring the feast of presidential tantrums and tribal dancing in  both houses. The US economy continues to improve and I remain cautiously optimistic that some of Trump’s initiatives on deregulation and tax reform will come to fruition. Since I have been overweight the US market for several years, I have no inclination to sell. While valuations in Europe are more attractive than the US, the US doesn’t have to satisfy 17 governments. The EU has always seemed to me to be a toxic brew with over- reaching plutocrats in Brussels, socialist labour policies and nationalist chest thumping. Nevertheless, the EU, despite Brexit and now Catalonia, markets in Europe are improving and the largest and cheapest ETF is the VGK from Vanguard. The Canadian market has flatlined this year until a September recovery in oils but there does appear to be a recovery underway in many sectors. My concerns however is that the proposed Morneau tax penalties on small business will have a severe impact. The reason is that these tax changes will tax the ‘retained earnings’ of business as personal income. Since small business owners are not civil servants or union members, retained earnings are the pension plan of small business owners. Retained earnings are the capital that business owners use to protect their business in an economic downturn and to expand business opportunities, technology and employees. Further, if positive tax changes proceed in the US, there will be a huge gap between business expansion here and the US.

TOP PICKS

VANGUARD FTSE EUROPE ETF (VGK.US) - US$58.54
Vanguard Europe all cap developed countries. A 23 bil ETF with low cost at.10.In USD Not held in any accounts

VANGUARD FTSE CANADA ALL CAP INDEX ETF (VCN.TO) - $31.94
Vanguard Canada All cap CDN, 220 stocks, low MERS at .06.Not held in any accounts.

BMO EQUAL WEIGHT OIL & GAS INDEX ETF (ZEO.TO) - $10.90
BMO Can equal weight.oils.Held in client and family accounts for app.2-3 years at $13.25
 

PAST PICKS

BMO EQUAL WEIGHT U.S. BANK HCAD INDEX ETF (ZUB.TO)

• Then: $20.02
• Now: $27.70
• Return: 38.36%
• Total return: 40.14%

HORIZONS BETAPRO S&P 500 INVERSE ETF (HIX.TO)

• Then: $7.26
• Now: $6.39
• Return: -11.98%
• Total return: -11.98%

HORIZONS ACTIVE FLOATING RATE BOND ETF (HFR.TO)​

• Then: $10.00
• Now: $10.05
• Return: 0.50%
• Total return: 2.60%

TOTAL AVERAGE RETURN: 10.25%