Mackenzie Minute: May 4, 2018
Michael Cooke, Head of Mackenzie ETFs, talks about using ETFs to position client portfolios against geopolitical uncertainty and a robust economy.
MICHAEL COOKE: Well, we’re all seeing a lot of interesting things in the headlines recently: Geopolitical turmoil in Southeast Asia, political tension in Washington, looming trade wars, a little bit of uncertainty about where the economy is going, what does it mean for inflation, what does it mean for interest rates. And these are always important factors for investors, but they seem to be colliding and happening concurrently in the first four months of 2018. So, it has created a lot of noise in financial markets and that’s contributed to an escalation in market volatility and short-term uncertainty.
The economy is chugging along. It’s difficult to know if we’re overheating, and again, what that means for inflation and interest rates, but we want to be mindful of that and thinking about how to position client portfolios against that backdrop. Are we trying to mitigate against risk or against the volatility that we saw in the first quarter of this year by improving diversification or perhaps becoming a little bit more defensive in how we position client portfolios?
It's a good time to be thinking about those considerations against this backdrop of different factors that are impacting the financial markets.
Well, now is probably as good a time as any to be revisiting the composition of your portfolio and how you want to set it up for, you know, the longer-term outlook for financial markets. So, fixed income is a core component of most portfolios. How do you better position your fixed income exposure with the potential for rising interest rates and inflation? There are solutions that can help you navigate through such an environment. I think we have a number of them with our Active Fixed Income (ETFs) suite, and as well for equity investors, for the equity component. Probably dampening down that volatility a little bit makes sense for investors in the current environment, and the TOBAM Maximum Diversification Index ETFs have done exactly that through the last three months or so and, I think, positioned clients well to achieve their growth objectives as well in their portfolios.