Probable Termination (TWTW – Aug 21-25, 2017)

Probable Termination – President Trump – at his finest “posturing” – this time with regards to #NAFTA, the renegotiations of which, naturally – MUST produce for him a tremendous SUCCESS … Hence his uttering the notion the agreement will probably have to be terminated as he otherwise doubts renegotiations will yield that for him …

Latest Developments:

  • Impact on Energy? Hurricane Harvey pounding Texas, Houston in particular
  • Jackson Hole – Janet Yellen speech, rather than speaking to “normalization” provided instead a review of the actions taken in the wake of Great Financial crisis. In so doing, and in essentially disagreeing with the wholesale deregulation Trump seems to favour, she may well have jeopardized any chances of seeing a second term … which my bet would be, she won’t, nor will care if she does or not…
  • French President Macron – is suffering a sharp drop in popularity (already?) – with his approval rating dropping from 57% after his election in May, to 37% currently
  • Roots – described by Bloomberg as “Iconic Canadian Retailer” is looking to go public
  • Bank of America – sees gold moving to $1400 per/oz against a backdrop of low long term rates and continued Trump related uncertainty
  • Canadian consumers – continue on … spending, spending, and … spending some more…
  • Q3 Bank Results – topping expectations; dividend increases coming through …
  • Barron’s – Questioning how much longer Canadian Tire can remain mostly immune from AMZN effect … AND – under the heading “Dump U.S. Stocks, Buy Emerging Markets”, profiles Rob Arnott suggesting US stocks are dead money from here, while EM should return 6.6% after inflation …

Latest market numbers as seen through ETFs providing exposure to the most commonly referred to benchmarks:

ticker name change ticker name change ticker name change
XIU S&P/TSX 60 -0.08% PXG RAFI Global Fundamental 0.28% VCN FTSE Canada All Cap Index ETF 0.69%
XIC S&P/TSX Capped Composite 0.72% PXS RAFI US Fundamental Index 0.22% VCE FTSE Canada Index ETF 0.76%
CRQ RAFI CDN Fundamental 0.89% QQC/F NASDAQ 100 CAD Hedged 0.54% VUN CRSP US Total Market Index Unhedged 0.02%
XSP S&P 500 CAD Hedged 0.74% PZC RAFI CDN Small-Mid Fundam -0.41% VSP S&P 500 CAD Hedged 0.84%
XUS S&P500 -0.03% VXC FTSE All-World Ex Canada Index ETF 0.27%
XMU MSCI Min Vol US -0.09% XXM/b Morningstar US Value (Unh) 1.12% VEF FTSE Developed ex North-Am CAD H 0.44%
CLU RAFI US Fund 1000 CAD H 0.95% YXM/b Morningstar US Momentum (Unh) 0.84% VDU FTSE Developed ex North-America 0.15%
XSU Russell 2000 CAD Hedged 1.42% FXM Morningstar CDN Value 1.90% VE FTSE Developed Europe 0.43%
XIN MSCI EAFE CAD Hedged 0.28% WXM Morningstar CDN Momentum 0.80% VA FTSE Developed Asia Pacific -0.16%
XEH MSCI Europe IMI CAD H 0.59% VXM/b Morningstar Intl Value (Unh) 0.30% VEE FTSE Emerging Mkts 1.87%
XEC MSCI EM IMI 1.86% ZXM/b Morningstar Intl Momentum (Unh) 0.50% HAZ Active Global Dividends 0.05%
XMM MSCI Min Vol Emerging 0.73% RWE MSCI Europe Low Risk Weighted (H) 0.04% HHF Morningstar Hedge Fund Index 0.87%
CWO RAFI Broad Emerging 2.51% HMF Auspice Managed Futures 0.95%
CJP RAFI Fundam Japan CAD H -0.07% ZDJ Dow Jones CAD Hedged 0.81% HAC Seasonal Rotation 0.05%
CDZ CDN Div Aristocrats 0.16% ZEQ MSCI Europe High Quality CAD H 0.41% HPR Active Preferred Shares 0.75%
week of: Aug 21-25, 2017 OVERALL Source: ETFinsight/Bloomberg

Respectively through available “FACTORS” (Smart or Strategic Beta) ETFs:

ticker name change ticker name change
RAFI: Value: Yield:
CRQ RAFI CDN Fundamental 0.89% VXM/b Morningstar Intl Value (Unh) 0.30% CDZ iShares S&P/TSX Canadian Dividend Aristocrats Index ETF 0.16%
CLU RAFI US Fund 1000 CAD H 0.95% XXM/b Morningstar US Value (Unh) 1.12% XHU iShares US High Dividend Equity Index ETF -0.28%
CJP RAFI Fundam Japan CAD H -0.07% FXM Morningstar CDN Value 1.90% VGG Vanguard US Dividend Appreciation Index ETF -0.84%
CWO RAFI Broad Emerging 2.51% XCV iShares Canadian Value Index ETF 0.57% CUD iShares US Dividend Growers Index ETF CAD-Hedged 0.66%
PXG RAFI Global Fundamental 0.28% VVL Vanguard Global Value Factor Etf 0.49%
PZC RAFI CDN Small-Mid Fundam -0.41% Momentum:
YXM/b Morningstar US Momentum (Unh) 0.84%
Min Vol: ZXM/b Morningstar Intl Momentum (Unh) 0.50%
VVO Vanguard Global Minimum Volatility Etf 0.76% WXM Morningstar CDN Momentum 0.80% Multi-Factors:
XMW MSCI Min Vol World -0.08% VMO Vanguard Global Momentum Factor Etf 0.42% XFC iShares Edge MSCI Multifactor Canada Index ETF 0.80%
XMI MSCI Min Vol EAFE -0.18% Liquidity: XFS iShares Edge MSCI Multifactor USA Index ETF 0.43%
XMM MSCI Min Vol Emerging 0.73% VLQ Vanguard Global Liquidity Factor Etf -0.61% XFI iShares Edge MSCI Multifactor EAFE Index ETF -0.22%
XMU MSCI Min Vol US -0.09% Quality: Low Risk Weighted:
XMV MSCI Min Vol Canada 0.78% ZEQ BMO MSCI Europe High Quality Hedged To CAD Index ETF 0.41% RWE First Asset MSCI Europe Low Risk Weighted ETF 0.04%
week of: Aug 21-25, 2017 FACTORS / SMART BETA / STRATEGIC BETA Source: ETFinsight/Bloomberg

Factors, Factors, and more Factors –  including Multi Factors, and Single Factors on a Global basis.

Active, you say? – See below, which captures weekly performance for ETFs managed by Strategists, or wraps incorporating several ETFs into one to solve for Conservative, Balanced, or Growth objectives:

ticker name change ticker name change ticker name change
HGM Horizons Managed Global Opportunities ETF 0.76%
EXGG Excel Global Growth Asset Allocation Etf -0.78% HAC Horizons Seasonal Rotation ETF 0.05%
EXGB Excel Global Balanced Asset Allocation Etf -0.50% HRA Horizons Global Risk Parity ETF 0.30%
HHF Horizons Morningstar Hedge Fund Index ETF 0.87%
DWG PowerShares DWA Global Momentum Index ETF 0.71%
XTR iShares Diversified Monthly Income ETF -0.18% XGR iShares Growth Core Portfolio Builder Fund 0.32%
FIE iShares Canadian Financial Monthly Income ETF 0.28% XCR iShares Conservative Core Portfolio Builder Fund 0.21%
ZMI BMO Monthly Income ETF 0.19% XGC iShares Global Completion Portfolio Builder Fund 0.43%
CBD iShares Balanced Income CorePortfolio Index ETF -0.09% FUT First Asset US Tactical Sector Allocation Index ETF 0.54%
ETP First Trust Global Risk Managed Income Index ETF 0.00% PRP Purpose Conservative Income Fund -0.05%
CBN iShares Balanced Growth CorePortfolio Index ETF 0.60%
XAL iShares Alternatives Completion Portfolio Builder Fund 0.64%
week of: Aug 21-25, 2017 ETF Strategists & ETFs of ETFs Source: ETFinsight/Bloomberg

Brought to you by: 

iShares: Koesterich: Gold shines as Washington stumbles

Vanguard: Answers to your clients’ questions on ETFs => Click HERE !

August 29th Webinar – Understanding and Implementing Dividend-oriented Strategies => Click HERE!

BMO ETFs: Mid-September is when 5 BMO ETFs migrate to different reference benchmarks => Click HERE!

Horizons ETFs: Horizons Managed Multi-Asset Momentum ETF => Final valuation upon termination => Click HERE!

RBC GAM ETFs: Moving up the ETFs ranks … From 7th in the industry as at the end of July, if the August numbers to 25.8 stand, RBC looks to have moved into 5th place, following Tier I players iShares; BMO ETFs; Vanguard; and Horizons.  Getting RBC there: estimated net inflows to 25.8 of some $111 MM, with RBO; RPF; and RPD leading the charge in terms of net creates.

First Asset – Launches EAFE Low Risk weighted ETFs => Click HERE!


Caroline Escott  – A robust Canadian economy is driving positive results for the Canadian banks in their Q3 reporting, which begun last week, with RY and CM the first of the Big Six to report, both delivering better than expected results, underpinned by strength in the domestic operations.

Optimism regarding a stronger Canadian economy and the rising rate environment is somewhat tempered by housing market concerns, the negative impact of a strengthening CAD and concerns regarding NAFTA renegotiations. The overall outlook remains positive, however, which results from RBC and CIBC reinforced.

While the benefit of rising rates will take some time to be realized (rate hikes came too late in the quarter, mid July, to make much of a difference), the yield curve has also steepened, which helps net interest margins – as it reflects the spread between what a bank earns on loans and what it pays on deposits.  A steeper curve tends to be more profitable for banks.

Although further increases in rates risk adding further stress to the housing market, most analysts expect only modest effects on the banks loan books.  Overall, credit quality is expected to remain resilient.

Adding to the positive impact of strong results, there is also the potential for dividend hikes from some of the Canadian banks. Both RY and CIBC announced dividend hikes.  Scotiabank is also expected to announce an increase to its annual dividend. BNS is scheduled to report its results on August 29th.

There is a variety of ways to gain exposure to the Canadian banks, in addition to direct ownership. Below are a few plain vanilla options that we believe warrant consideration.

Bank ETFs:

BMO Covered Call Canadian Banks (ZWB) – in case you are worried that housing market becomes a bigger issue, respectively one that caps the upside for banks in coming weeks, months, and possibly quarters …

BMO S&P/TSX Equal Weight Banks Index (ZEB) – affording you access to the big banks, with automatic rebalancing to equal weight positions on a pre-determined schedule, allowing for some gains realizations on the winners, and redeployment into the underperformers – a strategy that capitalizes on concept of mean reversion …

iShares S&P/TSX Capped Financials (XFN) – allowing you to partake in the broader financials space, including insurances cos, and money managers …

Weekly Volumes History to August 25, 2017

etfinsight volumes week ending august 25, 2017

Top and Bottom performing ETFs for the week of Aug 21-25, 2017:

Ticker Name % Change Avg Price Weekly Volume $ Volume traded
Top Performers week of Aug 21-25, 2017
XBM CN Equity iShares S&P/TSX Global Base Metals Index ETF 5.46% $12.73 137,292 $1,753,739
ZMT CN Equity BMO S&P/TSX Equal Weight Global Base Metals Hedged to CAD Index ETF 5.43% $11.24 738,546 $8,472,617
XCH CN Equity iShares China Index ETF 4.84% $26.06 31,734 $827,894
ZJG CN Equity BMO Junior Gold Index ETF 3.53% $8.89 566,164 $5,014,168
CBQ CN Equity iShares BRIC Index ETF 2.57% $25.06 82,728 $2,067,539
CWO CN Equity iShares Emerging Markets Fundamental Index ETF 2.51% $35.45 6,964 $247,110
XBZ CN Equity iShares MSCI Brazil Index ETF 2.29% $13.72 48,360 $666,921
HUN CN Equity Horizons Natural Gas ETF 2.20% $6.44 48,398 $306,469
XEM CN Equity iShares MSCI Emerging Markets Index ETF 1.98% $31.15 101,897 $3,171,542
ZEM CN Equity BMO MSCI Emerging Markets Index ETF 1.93% $19.45 2,408,814 $46,524,583
Bottom Performers
ZLC CN Equity BMO Long Corporate Bond Index ETF -0.65% $18.38 106,888 $1,965,338
ZUP CN Equity BMO US Preferred Share Index ETF -0.69% $24.69 17,027 $421,011
DLR CN Equity Horizons US Dollar Currency ETF -0.72% $12.47 1,538,966 $19,195,972
VGG CN Equity Vanguard US Dividend Appreciation Index ETF -0.84% $39.41 91,685 $3,621,283
XST CN Equity iShares S&P/TSX Capped Consumer Staples Index ETF -0.84% $53.70 181,339 $9,749,315
ZRR CN Equity BMO Real Return Bond Index ETF -0.87% $17.06 23,461 $400,836
HTB CN Equity Horizons US 7-10 Year Treasury Bond ETF -0.94% $51.68 6,655 $343,782
ZHP CN Equity BMO US Preferred Share Hedged to CAD Index ETF -1.28% $25.57 13,033 $333,273
FSF CN Equity First Asset Global Financial Sector ETF -2.05% $18.58 16,420 $306,249
HUV CN Equity BetaPro S&P 500 VIX Short-Term Futures ETF -10.47% $8.66 189,290 $1,677,694

Top Performing ETFs – Cyclical “angle” still looking like “risk on” ie- Normalization risk notwithstanding, EM, Base Metals continuing to do well …

Bottom Performing ETFs –Further pullback on the part of “volatility”, and otherwise what could be seen as possible chink in armour – ie weaker financials? and slight decline in consumers staples, though so modest one wouldn’t want to read too much into that…

Last week’s Sector Performance:

sector perfromance week ending august 25, 2017

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