Mike Philbrick, CEO, ReSolve Asset Management
FOCUS: Exchange-traded funds
Top Picks: iShares Gold BullionETF, TD Q U.S. Small-Mid-Cap Equity ETF, iMGP DBi Managed Futures Strategy ETF
MARKET OUTLOOK:
The U.S. yield curve has been inverted for more than 600 days, a signal that has historically preceded economic downturns, such as the 2008 financial crisis and the Great Depression. Longer yield curve inversions often lead to more severe recessions, while shorter ones result in milder downturns. Despite this warning sign, the economy and stock market remain strong, much like periods before previous recessions, raising concerns that the current market rally could be misleading and followed by a severe downturn if triggered by an external shock.
The U.S. Federal Reserve has maintained elevated and restrictive interest rates for nearly two years, similar to its approach before past crises. While high rates were initially necessary to control inflation, recent data shows inflation stabilizing, suggesting that maintaining tight monetary policy could be a mistake. Rising layoffs and reduced hiring indicate potential economic deterioration, yet the Fed plans to begin rate cuts only from September 2025. If rate cuts are too gradual, it could be too late to avert a downturn.
Despite this economic outlook, the stock market remains near all-time highs, highlighting a divergence often seen before major downturns or recoveries. Historical patterns suggest that markets can remain irrational for extended periods, rallying despite negative indicators. Recent bullish signals suggest short-term gains may continue, but caution is warranted given heightened recession risks. Investors should prepare for potential volatility and downside risks while remaining open to short-term opportunities if the market continues upward.
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TOP PICKS:
iShares Gold Bullion ETF (CGL.CTSX)
The fund seeks to replicate the performance of the price of physical gold bullion, less the fund’s fees and expenses. Gold remains an attractive asset in today’s uncertain economic environment. With persistent inflation, potential rate cuts, and ongoing geopolitical tensions, gold offers a hedge against currency devaluation and market volatility. Additionally, a weaker U.S. dollar boosts gold’s appeal globally, and central banks continue to increase their reserves, reflecting confidence in its enduring value.
TD Q U.S. Small-Mid-Cap Equity ETF (TQSM TSX)
The ETF offers exposure to U.S. small and mid-cap stocks using a quantitative, rules-based strategy to identify growth opportunities. U.S. small and mid-cap stocks, currently trading at historically low valuations relative to large caps, present a compelling opportunity for investors. These stocks are more sensitive to economic changes and could benefit significantly from a potential Federal Reserve rate cut and an economic recovery, as they tend to outperform during such periods due to their stronger growth potential and greater exposure to domestic markets.
iMGP DBi Managed Futures Strategy ETF(DBMF NYSEARCA)
It provides exposure to a diversified portfolio of managed futures strategies. It seeks to replicate the performance of leading managed futures hedge funds by dynamically allocating across various asset classes, including equities, fixed income, currencies, and commodities, using a systematic, rules-based approach. This ETF aims to capture trends and generate returns regardless of market direction, offering diversification beyond traditional stock and bond portfolios. These strategies typically have low correlation with traditional asset classes, making them valuable for reducing portfolio risk and enhancing returns, especially during periods of market stress or heightened volatility.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| CGL. TSX | N | Y | N |
| TQSM TSX | N | N | N |
| DBMF NYSEARCA | N | N | N |
PAST PICKS: JULY 24, 2023
3iQ Bitcoin ETF (BTCQ TSX)
- Then: $6.25
- Now: $12.77
- Return:100%
- Total Return: 100%
Global X MSCI Argentina ETF (ARGT NYSEARCA)
- Then: US$47.27
- Now: US$65.51
- Return:38%
- Total Return: 40%
iShares India Index ETF (XIDTSX)
- Then: $46.21
- Now: $56.87
- Return:23%
- Total Return: 23%
Total Return Average: 54%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| BTCQ TSX | Y | Y | N |
| ARGT NYSEARCA | N | N | N |
| XID TSX | N | N | N |
