Mike Philbrick, president of ReSolve Asset Management
Focus: ETFs

MARKET OUTLOOK

Freshly-minted Fed chairs often take a hawkish stance early in their tenure, hoping to establish a credible inflation-fighting reputation. Jerome Powell came out of the gate with a weak hawkish bluff, but markets forced his hand before Christmas and he has folded like a cheap suit. The Bank of China, the European Central Bank, the Bank of Japan and the Fed are back to blowing liquidity into markets with a firehose and investors have responded with Pavlovian gusto. According to the latest FOMC meeting, a “patient” Fed now expects no more rate hikes this year and announced that quantitative tightening will end in September.

To wit, the rebound in global markets continued in March, leading virtually all major asset classes into positive territory for the first quarter of the year. Once again, the narrative has been dominated by central banks on both sides of the Atlantic in the wake of weaker activity in major economies and fears of a global recession. Weak data may prompt greater central bank largesse, leading to higher stock prices in a continuation of the “bizarro” equilibrium that has prevailed over the majority of this cycle.

U.S. (up 4.1 per cent) and international (up 3.6 per cent) real estate along with intermediate (up 2 per cent) and long-duration (up 4 per cent) Treasuries led the rally. Stocks endured a turbulent month, but finished it in positive territory. It’s interesting to note that over recent months, leadership by U.S. stocks has waned both in Canada and abroad with assets like bonds, emerging market stocks, real estate and Canadian stocks outperforming.

We remain convinced that, while global governments are intent on preventing market declines at all costs, the potential for missteps and exogenous shocks to derail the “best-laid plans of mice and men” has rarely been greater. We also remain vigilant in following our process, focusing on risk management, diversification and portfolio agility.

TOP PICKS

ALPHA ARCHITECT INTERNATIONAL QUANT VALUE ETF (IVAL.N)

This ETF seeks to invest in the cheapest, highest quality, international value stocks using a sequential five-step process. The portfolio consists of 40 to 50 stocks, a highly concentrated value factor exposure on international stocks. This is a significant diversifier for Canadian portfolios.

ISHARES MSCI SINGAPORE ETF (EWS)

EWS seeks to track the investment results of an index composed of Singaporean equities. It has a low cyclically adjusted price-to-earnings (CAPE) ratio, low valuations across the board and proximity to the China reflation trade while at an attractive entry point.

HORIZONS CHINA HIGH-DIVIDEND YIELD INDEX (HCN.TO)

This ETF seeks to replicate the performance of the Hang Seng High Dividend Yield Index, which is comprised of Hong Kong’s 50 largest stocks and REITs with the highest net dividend yields and persistent dividend payment records.

PAST PICKS: JAN. 29, 2019

ISHARES 20+ YEAR TREASURY BOND ETF (TLT.OQ)

• Then: $121.02
• Now: $122.41
• Return: 1%
• Total return: 2%

SPDR INTERNATIONAL REAL ESTATE ETF (RWX)

• Then: $38.55
• Now: $38.88
• Return: 1%
• Total return: 1%

HORIZONS GLOBAL RISK PARITY ETF (HRA.TO)

• Then: $9.98
• Now: $10.21
• Return: 2%
• Total return: 2%

Total return average: 2%