Mike Philbrick, CEO, ReSolve Asset Management
Focus: Exchange-Traded funds
Top picks: BMO Equal Weight U.S. Health Care ETF, iShares Core Canadian Government Bond Index ETF, SPDR S&P Biotech ETF
MARKET OUTLOOK:
Stock markets remain near all-time highs, but beneath the surface, investor sentiment is fragile.
The recent earnings season highlighted just how nervous participants are about the durability of the AI cycle. Fear and doubt remain elevated — not because fundamentals are collapsing, but because expectations have moved faster than visible monetization.
Despite record investment in AI infrastructure — data centres, semiconductors, networking, and power — investors are wrestling with timelines. The question isn’t whether AI will transform productivity and profits, but when.
Early adopters are already embedding AI across workflows, but large-scale corporate deployment takes time. That gap between adoption and monetization fuels volatility and skepticism.
Valuations are part of the tension. Some worry that capex assumptions are too optimistic or depreciation too slow, but so far the data suggest persistent utilization and real demand for compute power. In short, the AI build-out is still expanding, not contracting.
The takeaway: this isn’t a bubble in the traditional sense — it’s a massive, multi-year capital cycle that’s still early in diffusion. The winners will be those with balance-sheet strength, pricing power, and exposure to the infrastructure and energy systems enabling AI.
Portfolio stance: stay invested in quality and profitable growth, maintain exposure to the physical build-out — semiconductors, base metals, uranium — and use gold and bonds as stabilizers while policy and sentiment swing between optimism and anxiety.
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TOP PICKS:
BMO Equal Weight U.S. Health Care ETF (ZUH TSX)
Theme: Healthcare as a Defensive Growth Anchor
Healthcare is one of the few sectors that reliably holds up when markets become more volatile or leadership narrows, which makes it well suited for today’s environment. The combination of elevated valuations in mega-cap tech, mixed macro data, and increasingly uneven economic performance has highlighted a growing need for portfolio ballast without sacrificing long-term growth.
ZUH provides exposure to U.S. healthcare companies—pharma, biotech, medical devices, and healthcare services—using an equal-weight methodology. That’s important, because it avoids overconcentration in a handful of mega-cap pharmaceutical names and distributes exposure across large and mid-cap innovators with differentiated revenue drivers.
Structurally, the healthcare sector benefits from consistent demand, demographic tailwinds, and pricing power that is less sensitive to the economic cycle. Importantly, healthcare is also entering an innovation period of its own, supported by advances in genetics, diagnostics, drug development, and AI-enabled clinical tools. Many of these technologies offer cost-saving potential to insurers and hospitals—exactly the type of productivity improvement corporations are seeking.
From a portfolio construction perspective, healthcare tends to have low correlation with cyclical sectors and often exhibits relative strength during periods of policy uncertainty, geopolitical tensions, or slowing growth. With the market now highly dependent on a narrow group of companies tied to the AI build-out, healthcare provides a way to maintain equity exposure while reducing portfolio volatility.
Ideal for investors seeking defensive growth, sector diversification, and balance sheet strength without stepping out of equities entirely.
iShares Core Canadian Government Bond Index ETF (XGB TSX)
Theme: Rebuilding Stability and Optionality
After one of the strongest equity runs in years—and with leadership increasingly limited to a narrow group of AI beneficiaries—there is a renewed case for rebuilding stability through high-quality fixed income.
XGB offers diversified exposure to federal and provincial government bonds across the maturity spectrum, capturing attractive yields while maintaining a conservative risk profile.
The macro backdrop justifies this allocation. While headline inflation has eased, policy uncertainty remains high. Trade tensions, tariff risks, shifting fiscal priorities, and an uneven labour market all contribute to a wider range of potential outcomes.
In this environment, government bonds serve two important functions. First, they help lower overall portfolio volatility at a time when equity valuations are elevated and concentrated.
Second, they provide optionality: high-quality bonds tend to hold value or appreciate when growth disappoints or when policy shocks arise, giving investors dry powder to rebalance into risk assets at more favourable prices.
With yields still near cyclical highs, investors are being compensated for holding duration in a way they weren’t during the zero-rate era. XGB’s mix of federal and provincial issues offers a balanced duration profile that can benefit from any moderation in growth or eventual policy easing. For investors expressing caution after a significant rally—or simply wanting to restore ballast—this ETF offers stable income and a mechanism to take advantage of future market pullbacks.
Ideal for investors looking to reduce equity beta while maintaining liquidity, defensive posture, and strategic rebalancing flexibility.
SPDR S&P Biotech ETF (XBI NYSE)
Theme: Selective Re-Entry into Innovation
Biotech has endured several difficult years marked by tightening financial conditions, risk aversion, and capital flight from early-stage innovation. As a result, valuations across the space have reset dramatically, leaving the sector at one of its most attractive entry points in a decade. XBI provides equal-weighted exposure to a large and diverse set of U.S. biotech companies, ensuring that the portfolio isn’t dominated by a handful of large incumbents and instead captures the breadth of early- and mid-stage innovation that defines the sector.
This matters because biotech tends to participate in market recoveries later in the cycle—after capital begins to broaden out from mega-caps and investors start rediscovering growth opportunities beyond the largest tech names.
Several catalysts support this shift: easing financial conditions, improving funding markets, increased M&A appetite from large pharmaceutical firms, and meaningful scientific breakthroughs in areas such as oncology, gene therapy, rare diseases, and AI-driven drug discovery. As generative AI reduces the time and cost of molecule design and clinical targeting, biotech stands to benefit directly from the next wave of productivity in healthcare innovation.
Biotech also plays a unique role from a portfolio-construction standpoint. It offers uncorrelated growth potential and asymmetric upside—particularly when sentiment recovers from depressed levels. Because XBI is equal-weighted, it captures early inflection points more effectively than market-cap-weighted alternatives, where large incumbents dominate performance.
Ideal for investors comfortable adding targeted growth exposure at reset valuations, seeking participation in the next phase of innovation as market breadth gradually expands.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| ZUH TSX | N | N | N |
| XGB TSX | N | N | N |
| XBI NYSE | N | N | N |
PAST PICKS: JAN. 21, 2025
Global X Gold Covered Call ETF (GLCC TSX)
Then: $28.49
Now: $54.72
Return: 92%
Total Return: 101%
BMO Equal Weight U.S. Banks Index ETF (ZBK TSX)
Then: $39.82
Now: $40.40
Return: 1%
Total Return: 3%
Roundhill Magnificent Seven ETF (MAGS CBOE)
Then: US$55.59
Now: US$66.31
Return: 19%
Total Return: 19%
Total Return Average: 41%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| GLCC TSX | N | Y | Y |
| ZBK TSX | N | N | N |
| MAGS CBOE | N | N | N |
