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It seems clear the Liberals do not have an Action Plan for Canada.

Since the 2016 budget, the private sector has downgraded the outlook for GDP growth in Canada. In other words, SELL, SELL, SELL.

Either they have no confidence in Liberal policies or the 2016 budget from the Liberals is not good for Canadian jobs and the middle class. The 2017 budget offered little in the way of changing that outlook. If anything, taking away some of the tax credits and increasing payroll taxes will lead to more downgrades for Canada's GDP.

While we did not get the big capital tax grab that I and many expected, I think they are coming for it eventually. They said they are waiting to see what the Trump Administration does.

On that I agree completely, what U.S. policy does has a huge impact on Canada's outlook. Canada has relied on the energy dividend for far too long, and we now face major headwinds. Sadly, for Alberta and Canada, if we cannot sell our No. 1 commodity at world prices, we will continue to lag the U.S. in economic output.

Slapping an additional tax on carbon makes Canada's best export even less competitive globally. While the Liberal budget correctly downgraded the outlook for energy prices, there was nothing in the budget to make me excited about Canada selling oil to Asia any time soon and raising our oil price to world levels. We need policies that will make Canadian business competitive. All I see in this budget is the government share of GDP going up and the private sector shrinking — a toxic combination for a nation whose top export commodities best day is in the rearview mirror.

So, while I'm not going to short the Canadian market, I do think Canada will underperform for a while.

When you look at the performance of the iShares S&P TSX 60 (XIU-T) relative to the Vanguard FTSE All Country All Cap World Index (VT-N), we can see that Canada has been underperforming for several months. So just like Canada outperformed the world last year on the back of oil prices doubling from $26 to $52, it has underperformed this year as Trump turned the pumps on and OPEC is losing the battle on supply constraints.

In Canada, stocks tend to drive the bus. The world equity index has about 6.25-per-cent exposure to energy stocks, where Canada has 21.3 per cent. Overall, the level of the S&P TSX 60 is close to all-time highs, but relative to the world index, it is now closer to the lower end of the range of the past 3 years.

So, what is the best way to play defence in the Canadian market while not sticking your head in the sand and going to cash.

I've started to buy one of the newest additions to the BMO ETF lineup - BMO Canadian High Dividend Covered Call (ZWC-T) strategy. It's expected yield is around 6 per cent and it has less risk than the overall index. It holds a basket of some of the best quality dividend payers in Canada with a yield enhancement from a 50-per-cent covered call overlay.

While I doubt the S&P TSX is heading back to last years panic lows when WTI was trading at $26, we could see another 5-10% price correction over the summer months. This ETF will not eliminate the downside, but it would fall about 70-80 per cent of the downside and yield more than double the return of XIU-T.

When looking to play defence, I love using covered call ETFs to get my equity market exposure. It will help those who can take some risk in their portfolios and are concerned about the outlook for Canada as I am.

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Do you want to learn more about how to navigate world markets better? I talk about how to build smarter ETF portfolios to deal with some of the uncertainties we may face in 2017 and beyond in my upcoming educational seminars across Canada. Registration is free at www.etfcm.com and you can follow me on my new blog www.bermanscall.com or watch me at Berman's Call Monday's at 11am ET. Follow me on Twitter: @LarryBermanETF on Facebook: ETF Capital Management.

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