Tyler Mordy, President and CIO at Forstrong Global Asset Management

FOCUS: Exchange Traded Funds & Macro Portfolio Strategy

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MARKET OUTLOOK:

Sources of uncertainty are clearly numerous, ranging from the increasingly theatric U.S. elections to the implications of the Brexit vote to the insolvency issues Italian banks are facing. Any measure of investor activity confirms current macro fears. Volume in inverse and volatility ETFs have reached record highs (recently accounting for more than 10 per cent of the NYSE’s trading activity). What’s also notable is that optimism on bonds is at an almost record high as well. The pros are similarly nervous. In addition to cash positions sitting at a 15 year high, the latest Bank of America Merrill Lynch Global Investor Survey also showed risk appetite and global equity allocation at four-year lows.

To be sure, markets are reacting to some legitimate macro fears. Central bank actions are increasingly frantic, China’s longer-running agenda has been poorly communicated and global demand remains structurally deficient. And, at times, false beliefs negatively impact the real economy so much that they become reality (this is Soros’ reflexivity thesis).

Still, since 2008, we have argued that post-financial crisis periods are a different animal. Investors, still carrying crisis-made scar tissue, tend to cling close to shore. Endless financial crisis fears prevail — whether U.S. fiscal cliffs, Chinese devaluations, Euro banking insolvencies and so on.  The narrative keeps shifting but a bearish bias lingers. This time has not been different and we are now living through another episode of fear. In this jittery environment, staying widely diversified is crucial. However, panicky responses from market participants create opportunities for nimble investors.

Top Picks:

Deutsche X-Trackers Harvest CSI 300 China A-Shares ETF (ASHR), Most recent purchase: May 16, 2016 @ $23.17 USD

WisdomTree Japan Hedged Real Estate Fund (DXJR), Most recent purchase: June 21, 2016 @ $24.62 USD

iShares Emerging Markets Local Currency Bond ETF (LEMB), Most recent purchase:  March 15, 2016 @ $41.55 USD

Fund Profile

Horizons Managed Global Opportunities ETF (HGM.TO)

Forstrong Global Asset Mangement is the sub-adviser

Performance as of: July 21, 2016

Top Holdings:

1. iShares MSCI EAFE Small-Cap ETF (SCZ) – 7.59%
2. VanEck Vectors Mortgage REIT Income ETF (MORT) – 5.32%
3. WisdomTree Japan Hedged Real Estate Fund (DXJR) – 5.13%
4. Deutsche X-trackers Harvest CSI 300 China A-Shares ETF (ASHR) – 4.95%
5. iShares Emerging Markets Local Currency Bond ETF (LEMB) – 4.86%

Twitter: @ForstrongGlobal, @tylermordy

Website: www.forstrong.com