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Effects of a Trump win on financial markets? Trump is promising tax cuts and infrastructure spending giving $10 trillion in renewed debt over the next few years. Initially that would be good for corporate profits. His policies relating to protectionism and closing of the world to the US, is very bullish for Asia longer-term.
BMO Europe High Dividend Covered Call Hedged to CAD (ZWE-T) or BMO US High Dividend Covered Call (ZWH-T)? He has a thesis that the US’s outperformance of the equity and currency markets is over. We have had 7 years of a structural US$ Bull market, and their equity market is expensive with headwinds on earnings. Europe has the unique situation where everybody recognizes the structural problems, but those are already priced in.
BMO Europe High Dividend Covered Call Hedged to CAD (ZWE-T) or BMO US High Dividend Covered Call (ZWH-T)? He has a thesis that the US’s outperformance of the equity and currency markets is over. We have had 7 years of a structural US$ Bull market, and their equity market is expensive with headwinds on earnings. Europe has the unique situation where everybody recognizes the structural problems, but those are already priced in.
The high-yield bond market in the US is interesting. In January everybody thought the troubles in the high-yield bond market would echo itself into something that would look more like a sub prime crisis in 2008. He had disagreed with this, so has been very Long on this all year. The bond and credit markets have done really well over the last few months, so he would recommend you shorten your duration in bond markets and increase your credit risks.
India? The Indian central banker has just resigned. He was a great central banker and has done a lot of good things for the country. However, he doesn’t think this resignation will impede the plans of the Mohdi government. It would be hard to find a better emerging market than India. Everything you see in the West, such as aging demographics, high debt levels or low interest rates, there is the exact opposite in India. This is the ETF that he uses to plays this theme. This is especially a good, long term holding.
A senior’s ETF portfolio? For his clients, particularly for a retiree, the goal is to avoid big mistakes in a portfolio. The 1st line of defence is global diversification. When constructing a portfolio, think of core and satellite. The best way is to build a core of cheap peer beta, and be as widely globally diversified as possible. As a satellite component, he usually puts in country sector, different asset classes, that he thinks provides better risk return characteristics. The core functions as a minimum level of diversification.
Smart beta versus traditional market cap? Original ETFS were based on market capitalization, the underlying weights of the individual stocks, bonds, etc. Any departure from that creeps into the world of “Smart beta” where you can weight stocks by their dividends, revenue, etc. Because he is making the decisions on a global asset allocation basis, he wants the cheapest, purest beta that tracks a particular index, for example gold. You have to be aware of what is under the hood.
Grandchildren’s RESP investments for the next 15-18 years? You want to have something that has more risk given the time horizon, as well as something that is broadly diversified. You can either put together a collection of ETF’s, or you can access an ETF package such as this one. Vanguard and iShares both offer a variety of total market ETFS.
ETFs. Early on, praises were sung for low costs, tax efficiencies, etc. Now there is a recognition of a fundamental shift in the way portfolio management is going to be done in the future. It is moving from single high/low stock picking to multi-asset class investing, and recognizing that this is really a game changer for the portfolio manager industry. ETF providers have done this colonization of the asset classes. For example, previously access to gold bullion was very difficult and you had to pay storage costs, etc. Also, the offshore Chinese bond market is a really good example of something that nobody really knows about and is not represented very well in portfolios, but offers a lot of non-correlation as a different portfolio component. His process is to look at super trends, such as a 3-5 year view and looking to see what are going to be the drivers for portfolio returns. Then he looks at a less than 12-month view, which really relies on behavioural analysis including investor psychology and sentiment, and trying to position accordingly.