Mike Philbrick's Top Picks: Jan. 29, 2019

Mike Philbrick, president of ReSolve Asset Management
Focus: ETFs

MARKET OUTLOOK

In my last appearance in November, we stressed that there had been a significant shift from return “on” capital to a return “of” capital, meaning the preservation of capital has become more important than the return on capital. This remains our continued theme.

Whereas all markets were up in 2017, they were all down in 2018. In fact, the worst-performing major market in 2017 outperformed the best-performing market in 2018 — and they were both the same market (U.S. Treasuries). In addition, 2018 saw much greater volatility across all markets punctuated by several mini-crashes. What’s worse, two of the three crashes originated at or near long-term high prices, and manifested as acute reversals from highly constructive intermediate-term trends resulting in cash being the best-performing asset class in 2018. This hasn’t happened since 1994.

These conditions take time to dissipate as there’s change going on beneath the surface of markets and new trends are being born while the previous trends are dying. This is a time to be very open-minded and able to let go of the narratives of old.

At ReSolve, we’re quantitative and systematic in our creation of portfolios thus we often find ourselves in portfolios that do not have a “pervasive investor narrative” yet. There’s significant excess return that can live here, of course there is also significant discomfort because it will feel like you’re doing something very different form the heard – a very challenging experience for investors.

TOP PICKS

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

TLT seeks to track the investment results of an index composed of U.S. Treasury bonds with remaining maturities greater than 20 years.

SPDR INTERNATIONAL REAL ESTATE ETF (RWX.N)

RWX tracks a market-cap-weighted index of firms involved in the ownership and operation of real estate internationally, excluding the U.S.

HORIZONS GLOBAL RISK PARITY ETF (HRA.TO)

HRA seeks long-term capital appreciation and global balance through the use of asset allocation. It will primarily use exchange-traded products to gain exposure to a portfolio of global asset classes with a focus on the forecasted amount of risk that each asset class contributes.

PAST PICKS: NOV. 23, 2018

HORIZONS 7-10 YEAR TRESURY BOND ETF (HTB.TO)

• Then: $52.64
• Now: $54.27
• Return: 3%
• Total return: 3%

INVESCO S&P/TSX COMPOSITY LOW VOLATILITY INDEX ETF (TLV.TO)

• Then: $27.03
• Now: $27.33
• Return: 1%
• Total return: 2%

CAMBRIA CORE EQUITY ETF (CCOR.N)

• Then: $26.38
• Now: $26.20
• Return: -1%
• Total return: -1%

Total return average: 1%

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