Market Call Tonight for Monday, April 17, 2017
John DeGoey, portfolio manager at Industrial Alliance Securities
Focus: Personal finance and ETFs
Economic growth is stalling in the West and there is little indication that it will pick up. The only part of the world that is likely to see sustained growth over a long period is emerging markets. That is also the only part of the world where equity valuations are not stretched. As an added bonus, correlations are lower between emerging markets than with other development markets. People simply ought to hold a larger percentage of their total portfolio in emerging markets than they currently hold. Virtually any investor could hold five per cent, but aggressive investors could go to something like 15 per cent to 20 per cent.
In contrast, traditional first-world equity markets might do comparatively poorly over the next decade or more, since there is really no way left to stimulate growth in the West. Governments and households are both more stretched than ever, the population is getting older and less productive and current interest rates mean traditional first-world bond investors might earn negative real returns for most of a generation. Overall, large macro trends are ensuring that economic growth will likely continue to be modest in the developed world.
VANGUARD FTSE EMERGING MARKETS ALL CAP INDEX ETF (VEE.TO)
This is the position that I recommend most often on Market Call. This is a core holding that virtually every client of mine has some exposure to. A cheap and broadly diversified way to get exposure to a criminally under-owned asset class.
SPHERE FTSE EMERGING MARKETS YIELD INDEX ETF (SHZ.TO)
Much like VEE, but with a factor tilt toward value stocks owing to the use of a sustainable dividend tilt.
ISHARES CORE MSCI EMERGING MARKETS IMI ETF (XEC.TO)
Much like VEE, but with a factor tilt toward small-company stocks in an attempt to improve risk-adjusted returns.
PAST PICKS: MAY 2, 2016
ISHARES INDIA INDEX ETF (XID.TO)
- Then: $25.83
- Now: $33.24
- Return: +28.68%
- TR: +29.15%
VANGUARD FTSE CANADIAN HIGH DIVIDEND YIELD INDEX ETF (VDY.TO)
- Then: $29.10
- Now: $33.65
- Return: +15.63%
- TR: +19.45%
VANGUARD FTSE EMERIGING MARKETS ALL CAP INDEX ETF (VEE.TO)
- Then: $26.29
- Now: $32.07
- Return: +21.98%
- TR: +24.55%
TOTAL RETURN AVERAGE: +24.38%