Full episode: Market Call for Thursday, September 17, 2020
Mike Philbrick, portfolio manager at ReSolve Asset Management
Uncertainty abounds – but doesn’t it always?
No doubt the U.S. election brings much uncertainty, but these levels of uncertainty aren’t necessarily much higher than what we've seen in other episodes. I would argue that the uncertainty around COVID’s continued economic impacts could dwarf that of the election. The question then becomes: how does an investor prepare himself?
I would propose the first step is to be ready for whatever outcome might unfold and weather a possible election storm. Gold and oil are going to respond quite differently from stocks and bonds depending on the election outcome, so the most robust portfolio would consider how to balance these asset classes from a risk perspective such that any outcome that occurs isn’t too destructive to your portfolio. Once you’re comfortable with your preparedness, then you might consider how to tilt your portfolio to profit for some of the potential outcomes you would deem more likely. This allows us to position the portfolio from a probabilistic perspective rather than deterministic one.
In our experience, portfolios today seem to be underexposed to assets that thrive in a slowing growth environment. Assets like gold, silver, and inflation-protected bonds like TIPS and Real Return Bonds are either absent from portfolios or are severely underrepresented. At the same time, they are overemphasizing assets in the disinflationary boom quadrant represented by U.S. mega-cap tech equities. This is a crowded trade and crowded trades are susceptible pockets of illiquidity and sudden declines.
BMO Real Return Bond Index ETF (ZRR TSX)
The Bitcoin Fund from 3iQ (QBTC-U TSX)
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PAST PICKS: OCT. 29TH, 2019
Horizons Gold ETF (HUG TSX)
- Then: $12.99
- Now: $16.35
- Return: 26%
- Total Return: 26%
Brompton European Dividend Growth ETF (EDGF TSX)
- Then: $10.22
- Now: $9.67
- Return: -5%
- Total Return: -1%
Franklin Liberty QT U.S. Equity Index ETF (FLUS TSX)
- Then: $25.62
- Now: $26.60
- Return: 4%
- Total Return: 6%
Total Return Average: 10%