Market Call Tonight for Friday, September 1, 2017
John Hood, president & portfolio manager at J.C. Hood Investment Counsel Inc.
FOCUS: Options & ETFs
Donald Trump is the most obstreperous president to ever strut in front of the media.This is disappointing because his demeanor mitigates against any consensus even within his own party. As a result, some very important policy initiatives, tax reduction, and elimination of over-zealous banking regulations are being delayed. Fortunately, despite political excesses, the markets are largely ignoring the melodrama and focusing on economic growth. As a result, I continue to buy the U.S., but not overweighting as in the past 8 years. In Canada, Ottawa’s latest assault on small business is understandably meeting resistance; the government is addicted to fiscal incontinence. Nevertheless, the Canadian economy is doing very well, noting the unexpected spurt in GDP, so I am also buying Canadian ETFs.
VANGUARD FTSE CANADA ALL CAP INDEX (VCN.TO)
Bought at $30.82. Cheap, just 6bps, 220 holdings, but not really ‘small cap.’ Similar to other broad ETFs from iShares, BMO. Usual Canadian asset mix: 35 per cent financial, 20 per cent energy, 11 per cent base materials.
HORIZONS BETAPRO S&P/TSX 60 INDEX (HXT.TO)
Bought at $30.76. On the TSX 60. A swap-based ETF i.e, they do not hold the actual securites but have a counterparty agreement with NB and CIBC. As a result, they do not pay any distributions, so no income tax. Distributions increase the NAV and they are taxed as capital gain when sold. This is for investors who do not want or need additional income, so not a good choice for most retirees but good for higher income millennials.
VANGUARD U.S. TOTAL MARKET INDEX (VUN.TO)
Unhedged at US$43.08. 3600 holdings, P/B 2.9, P/E 21.5. I like the breadth of the U.S. market relative to Canada. 20 per cent financials, 18 per cent tech, 13 per cent health care, six per cent energy.
PAST PICKS: AUGUST 4, 2016
SPDR S&P 500 ETF TRUST (SPY.US)
- Then: $216.41
- Now: $247.90
- Return: 14.55%
- Total return: 16.88%
BMO EQUAL WEIGHT U.S. BANK HEDGED TO CAD ETF (ZUB.TO)
- Then: $18.61
- Now: $25.69
- Return: 38.04%
- Total return: 39.96%
BMO SP/TSX EQUAL WEIGHT OIL & GAS INDEX ETF (ZEO.TO)
- Then: $11.54
- Now: $10.11
- Return: -12.39%
- Total return: -10.32%
TOTAL RETURN AVERAGE: 15.50%