John DeGoey is vice-president and portfolio manager at BBSL. His focus is personal finance and ETFs.
Vanguard FTSE Emerging Markets Index ETF (VEE-T)
Vanguard FTSE Emerging Markets Index ETF is a long-time favourite of mine because I believe emerging market equities are seriously under-owned by most people. The asset class correlates weakly to traditional equities, is trading at lower price to earning (P/E) multiples than western counterparts, and represents a part of the world that is growing faster than the anemic growth levels we're seeing in the first world. This product, in particular, is extremely diversified, so country risk and sector risk is modest.
iShares Global Agriculture Index ETF (COW-T)
According to The Economist, over the next 40 years humans will need to produce more food than they did in the past 10,000 years put together. Meanwhile, climate change will likely have a significant impact on farmland productivity around the world. This is a simple supply and demand story for a commodity that literally has no substitutes in aggregate.
iShares Exponential Technologies ETF (XT-NYSEARCA)
iShares Exponential Technologies ETF gets people exposure to "exponential technologies" like nano-technology, 3D printing, and robotics. I just finished reading a book called Bold by Peter Diamandis, and I'm convinced that these technologies and others like them will revolutionize the world in a number of transformative and positively disruptive ways.
Past Picks: May 1, 2014
iShares S&P/TSX Capped Composite Index ETF (XIC-T)
Then: $23.19; Now: $24.01 +3.54%; Total return: +6.23%
iShares S&P 500 Index Fund CAD-Hedged (XSP-T)
Then: $21.69; Now: $24.61 +13.46%; Total return: +15.25%
iShares MSCI EAFE Index Fund CAD-Hedged (XIN-T)
Then: $22.00; Now: $25.86 +17.55%; Total return: +20.85%
Total return average: +14.11%
Economic growth is stalling in the west and there is little indication that it will resume any time soon. There are only a few sector themes that are likely to do well in this environment: those with a relatively inelastic demand like infrastructure, agriculture and water as well as truly new, world-altering exponential technologies. Traditional equity investments, in contrast, might do comparatively poorly, since there is really no way left to stimulate growth. Governments and households are both more stretched than ever, the population is getting older and less productive and interest rates are the most accommodative in history. Even with all this stimulus and low inflation, these large macro trends are ensuring that economic growth will continue to slow down. People should re-calibrate their expectations toward lower returns for virtually all asset classes going forward.