Terry Shaunessy, chairman and portfolio manager at Shaunessy Investment Counsel
FOCUS: ETFs

MARKET OUTLOOK

Turbulent but profitable times ahead

The investment outlook for 2021 looks positive as policymakers will likely err on the side of caution or, shall we say, “generosity.” With this as the backdrop, we continue to expect that regional and sector rotation will become a more noticeable feature of the next leg up in equities. Value-dominated equity markets such as Canada, Australia and Europe should outperform the S&P 500 and its FAANG stalwarts, suggesting a period of significantly greater market breadth than that which has been experienced in years. On sector rotation, long forgotten “no-tech” sectors such as materials, industrials and financials should make their way to the top of the performance list as pent-up consumer demand drives a rebound in global economic activity. Commodity markets will remain tight due to increased demand for housing, autos and other durables, while gold should benefit from a decline in the U.S. dollar and some rise in cyclical price inflation.

If our view of resurging economic growth over the next twelve months proves to be correct, the global bond aggregate with a current yield to maturity of less than 1 per cent and a weighted average duration 7.5 years will struggle to produce positive annual investment returns. Consequently, we continue to hold minimum allocations to fixed income and will begin to dial down weighted average durations as an offset to rising interest rates at some point in 2021.

TOP PICKS

Terry Shaunessy's Top Picks

Terry Shaunessy, chairman and portfolio manager at Shaunessy Investment Counsel discusses his top picks: XMC, XGD and ACWX.

iShares S&P U.S. Mid-Cap Index ETF (XMC TSX) Most recent purchase price $21.95

For 2021, we expect greater U.S. market breadth which means more industry sectors and a wider array of companies will move to the top of the performance list. XMC listed on the TSX fits that expectation with a particular emphasis on industrials, financials and consumer cyclicals.

iShares S&P/TSX Global Gold Index ETF (XGD TSX) Most recent purchase price $19.55

We look for gold bullion prices to rise over the next few years accompanied by the typical volatility of this commodity. Gold equities provide a leveraged way to participate in higher future bullion prices. XGD is a convenient way to invest and has recently corrected from its 52-week high of $26.

iShares MSCI ACWI ex US ETF (ACWX NASD) Most recent purchase price $52.45

ACWI stands for “All Country World Index.” ACWX includes all stocks outside the U.S. equity market. Listed in New York, this ETF provides a convenient way to regionally diversify your portfolio into influential markets such as Japan, China, U.K. and Europe. Industry sectors are dominated by financials, consumer Discretionary and Industrials giving it a value/cyclical focus- a nice offset to the tech dominated S&P 500.  

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
XMC Y N Y
XGD Y Y N
ACWX Y Y Y

 

PAST PICKS: JAN. 24, 2020

Terry Shaunessy's Past Picks

Terry Shaunessy, chairman and portfolio manager at Shaunessy Investment Counsel discusses his past picks: Vanguard FTSE Developed Europe All Cap Index ETF, XEC and Invesco S&P 500 Equal Weight ETF.

Vanguard FTSE Developed Europe All Cap Index ETF (VE TSX)

  • Then: $29.91
  • Now: $29.88
  • Return: 0%
  • Total Return: +2%

iShares Core MSCI Emerging Markets IMI Index ETF (XEC TSX)

  • Then: $27.14
  • Now: $30.13
  • Return: +11%
  • Total Return: +12%

Invesco S&P 500 Equal Weight Index ETF (EQL TSX)

  • Then: $23.48
  • Now: $25.00
  • Return: +6%
  • Total Return: +8%

Total Return Average: +7%

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
VE Y N Y
XEC Y N Y
EQL Y N Y

 

WEBSITE: https://www.shaunessy.com/