Some advisors are moving to low-volatility and alternative funds while others insist on staying the course
While some advisors are reducing exposure to U.S. and Canadian stocks or moving into alternatives, others prefer to stick with long-term strategies and avoid tactical moves.Market reaction to U.S. President Donald Trump’s proposed policies has been relatively muted, with stock indexes in Canada and the U.S. continuing to trade close to record highs. But the possible effects of tariffs and other policies have many Canadians concerned and looking for ways to protect their investments.
In response to these risks, he says investors should reduce exposure to both U.S. and Canadian stocks. He has gone so far as removing clients from North American equities almost entirely, shifting allocation to alternative investments that provide relatively stable high single-digit returns and aren’t correlated to the broader market.
Mr. Wong says low-volatility or alternative funds can be useful tools for managing risk in uncertain market conditions, but he notes these funds don’t always provide the downside protection investors expect. That includes looking for companies with wide economic moats that can’t be replaced by U.S. competitors. He cites the example of Canadian heavy oil producers that are needed for U.S. refining operations.
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