John Hood, president and portfolio manager at J.C. Hood Investment Counsel Inc. 
FOCUS: Options and ETFs
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MARKET OUTLOOK

Economic historian Niall Ferguson recently compared Donald Trump to mad King George 111, known as the King who lost America. George 111 was well known for his ‘excessive loquacity,’ i.e. couldn’t keep his mouth (or in Trump's case, Tweets) shut. Ferguson suggested Trump may soon be found darting through the White House garden in his nightshirt. Despite Trump’s bluster, he has at last succeeded in ramming through his corporate tax cuts, which has been a very nice Christmas present for investors in the U.S. market, and we are very happy to have been overweight the U.S. market for several years. Trump has already made strides in deregulation and if he can revamp Dodd Frank, which hamstrings the investment banks, they will be active in the market as well. So we have low interest rates, a huge tax cut, provisions in process for the repatriation of corporate capital, unemployment at just four per cent, self-sufficiency in energy, and accelerating economic growth to 2.7 to 3 per cent. Where’s the Grinch?

There are two clouds on the horizon: Trump has not addressed debt reduction but assumes it will be relieved by economic growth, which could be correct. Two, North Korea  — with pudgy Kim Jong Un as warden of the world’s largest prison camp — has both the nuclear weapons and the long range missiles, but not necessarily a missile that can deliver the weight and complexity of a bomb. This means there is still time for some diplomatic persuasion/eye-gouging by China, who absolutely do not want a nuclear war and 35 million refugees on their doorstep.

In the Canadian markets I cannot fathom why Ottawa persists in adding a dreamy social agenda to trade negotiations, nor do I comprehend why the government is not aggressively permitting pipelines. Nevertheless I suspect we will be dragged along behind U.S. success particularly in those sectors, like Canadian banks and industrials that have increased exposure to U.S. markets.

TOP PICKS

VANGUARD U.S. TOTAL MARKET INDEX ETF (VUS.TO)
With a USD hedge trading on the TSX at $53.31. 3600 stocks.

FINANCIAL SELECT SECTOR SPDR FUND (XLF.US)
State Street at $28.11 is a large cap financial ETF with 50 per cent banking, 30 per cent insurance. 

SPDR PORTFOLIO SMALL CAP ETF (SPSM.US)
State Street small cap SPSM at $30.25 with a .04 per cent MER for clients who already hold large cap ETFs like SPY.

PAST PICKS: JUNE 30, 2017

ISHARES S&P/TSX CAPPED COMPOSITE INDEX FUND (XIC.TO)

• Then: $24.02
• Now: $25.77
• Return: 7.28%
• Total return: 8.06%

BMO EUROPE HIGH DIVIDEND COVERED CALL HEDGED TO CAD ETF (ZWE.TO)

• Then: $21.93
• Now: $21.94
• Return: 0.04%
• Total return: 2.81%

ENERGY SELECT SECTOR SPDR (XLE.US)

• Then: $64.92
• Now: $72.33
• Return: 11.42%
• Total return: 13.63%

TOTAL RETURN AVERAGE: 8.16%

WEBSITE: www.jchood.com