Mike Philbrick, portfolio manager at ReSolve Asset Management

FOCUS: Exchange-traded funds

MARKET OUTLOOK:

In the early days of March, global bonds have continued to suffer intense selling pressure. While CPI's have yet to confirm the resurgence of inflation, investors are increasingly uneasy in the face of mounting signs of cost-push, and expectations of imminent demand-pull dynamics. The rise in grain and energy prices is a worrying development and imposes major downstream effects to global living costs. While the former impacts livestock and biofuels, the latter cascades into transportation and logistics, the backbone of our modern economy.

The new U.S. government has ordered a review of critical supply chains focused on semiconductors, batteries, pharmaceuticals and all key underlying minerals and ingredients following recent disruptions particularly affecting the technology sector. The move sparked criticism from China – which controls approximately 90 percent of rare earth metals production – warning this would only harm global trade. The crucial question now is whether we are witnessing a temporary blip of rising prices within a longer-term deflationary trend, or a structural shift into an inflationary regime. The answer will have critical implications for portfolios over the coming months, and possibly years.

As we turn our attention to North American stock markets over the past week, we observe new all-time highs in the TSX, DJIA, NYSE Composite, Russell 2000, Dow Transports, the NYSE A/D line and strength in financials, materials, and shipping rates.

These are not the general conditions of a looming bear market and investors who are paying attention have observed that sector leadership is evolving.

TOP PICKS

Horizons Global Uranium Index ETF (HURA TSX)

HURA is the first ETF in Canada to provide direct exposure to the global Uranium sector. HURA is exposed to the performance of a basket of issuers which (a) are primarily involved in the uranium mining and exploration industry; or (b) invest and participate directly in the physical price of uranium. Up to 25 per cent of the portfolio provides exposure to the price of the Uranium commodity. These two segments will likely see significant growth if global demand for uranium increases.

iShares India Index ETF (XID TSX)

XID seeks to provide long-term capital growth by replicating the performance of the CNX Nifty Index, net of expenses. This provides exposure to 50 of the largest Indian companies, by market cap, in a single fund. India is the world's second-most populous nation and one of the world's largest emerging markets.

CI Galaxy Bitcoin ETF (BTCX TSX)

BTCX became the third bitcoin ETF to be launched on the Toronto Stock Exchange and it will offer exposure to bitcoin held in cold storage via the ETF format. It comes to market with a category- low expense ratio of 0.40 per cent. A very unique and frontier asset class for Canadian investors to consider.

PAST PICKS: June 1, 2020

Sprott Physical Silver Trust (PSLV TSX)

Provides a secure, convenient, and exchange-traded investment alternative for investors who want to hold physical silver. It is actual silver bullion, can take physical delivery monthly with certain restrictions and is held at the Canadian mint.

• Then: $8.97
• Now: $11.74
• Return: 31%
• Total return: 31%

Horizons Enhanced Income Gold Producers ETF (HEP TSX)

An equal weight gold miner ETF rather than market cap weighted, and has a covered writing overlay to enhance income to ~4.5 per cent. There are drawbacks to covered writing in strong trending markets. The fee is .65 per cent but that’s acceptable given the extra effort required for covered writing.

• Then: $34.91
• Now: $29.62
• Return: -15%
• Total return: -11%

The Bitcoin Fund (QBTC/U TSX)

The Bitcoin Fund from 3iQ holds Bitcoin, stored “offline”, is a closed-end fund that trades on the TSX. It is regulated, offered by prospectus, and is CRA compliant. The management fee is 1.95 per cent and presents a unique opportunity for Canadians to own this emerging asset class via a heavily regulated investment channel.

• Then: $12.14
• Now: $62.32
• Return: 413%
• Total return: 413%

Total return average: 144%

TWITTER: @investresolve

WEBSITE: www.investresolve.com