Mike Philbrick, president of ReSolve Asset Management
Focus: Exchange-traded funds

MARKET OUTLOOK

Markets closed last week on a high note, with the S&P 500 finishing up 0.4 per cent and the S&P Global BMI gaining 0.3 per cent on Friday. If October were to end yesterday, global equities would end the month in positive territory nearly across the board and this is a strange phenomenon. Whether the U.S. is doing official quantitative easing or not is largely irrelevant. They’re expanding the balance sheet again and the messaging is more important than the mechanics. Markets love a loose central bank. Despite the ongoing slowdown in global manufacturing (Korean exports fell another 20 per cent in the first 20 days of this month and the Markit German Manufacturing PMI is still rooted in the low forties), European and German equities look to be breaking out.

It’s a busy week as more than 160 companies in the S&P 500 will report earnings, including Apple, Alphabet and Facebook. So far, 39 per cent of S&P 500 issues have reported, with three fourths of those beating earnings estimates. The story is very similar to what we saw in Q1 and Q2: actual earnings are less bad than feared and generally beat lowered expectations.

It is also Fed week. Markets are all but certain that the FOMC will cut rates on Wednesday. Q3 U.S. GDP figures will also be released that same day and they’re expected to show that the economy is cooling. Then on Thursday, it’s time for Europe GDP to hit the tape and the Bank of Japan to announce their latest interest rate policy decision. The week closes out with U.S. employment data on Friday.

It’s a market of mixed signals. It’s best to be careful and find unique ways to prosper.

TOP PICKS

HORIZONS GOLD ETF (HUG:CT)

HUG seeks investment results corresponding to the price of gold via the futures markets and returns are hedged back to the Canadian dollar. The management expense ratio (MER) is 0.65 per cent.

BROMPTON EUROPEAN DIVIDEND GROWTH ETF (EDGF:CT)

European equities appear to be attractively valued. The continent is more insulated from the U.S.-China trade war and falling unemployment coupled with recent stimulus may stimulate economic activity and growth. Concerns around Brexit, global growth and trade, which have played a large role in fuelling negative sentiment towards European equities, may be overblown and have led to significant under-exposure in portfolios

FRANKLIN LIBERTYQT U.S. EQUITY INDEX ETF (FLUS:CT)

FLUS provides smart beta U.S. equity exposure using a multi-factor approach that has conviction towards 50 per cent quality, 30 per cent value, 10 per cent momentum and 10 per cent low volatility. It’s the lowest cost U.S. smart beta ETF with an MER of 0.25 per cent. FLUS carries 250 holdings, which are semi-annually rebalanced to a 1 per cent cap per holding. Overall, FLUS is a high-quality portfolio that should weather the storm of economic downturns due to the smart beta screens.

PAST PICKS: NOV. 23, 2018

HORIZONS 7-10 YEAR TREASURY BOND ETF (HTB:CT)

• Then: $52.64
• Now: $58.37
• Return: 11%
• Total return: 11%

INVESCO S&P/TSX COMPOSITE LOW VOLATILITY INDEX ETF (TLV:CT)

• Then: $27.03
• Now: $29.78
• Return: 10%
• Total return: 15%

CAMBRIA CORE EQUITY ETF (CCOR:UN)

• Then: $26.38
• Now: $27.23
• Return: 3%
• Total return: 4%

Total return average: 10%