U.S. stocks with a covered call strategy can make sense in this environment
One person will have a huge influence on how your portfolio performs this year. That man is Donald Trump, who was sworn in on Monday as the 47th U.S. President. His actions over the next four years will have a direct impact on how the Canadian economy, and by extension the TSX, performs.
In November, Mr. Trump said his planned tariffs would remain in place until Canada and Mexico tightened up their border controls to stop the flood of migrants and drugs into the U.S. So, what should income investors do? A broker I spoke with says he is advising clients to invest in U.S. equities that come in a Canadian wrapper – especially those that use covered call options to generate additional income.The rationale is that if Mr. Trump is intent on adopting an America-first policy that includes high tariffs, the best strategy is to go along for the ride. Other policies that he has promoted, like tax cuts and deregulation, should give a boost to U.S. stocks.
The fund gained 13.14 per cent in 2024. The average annual compound rate of return over the past ten years was 8.58 per cent. That’s a respectable number but investors should be aware that the use of covered calls boosts income but reduces potential capital gains.
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