Market Call: Mike Philbrick's market outlook on exchange-traded funds

Key Concepts

• Risk Rebalancing: Adjusting portfolio asset allocation to align with target risk tolerance, especially after significant market gains.
• Index Concentration: The disproportionate influence of a few large companies on market indices (e.g., the S&P 500).
• Diversification: Spreading investments across different asset classes, sectors, and geographies to reduce risk.
• Return Stacking: Layering diversifying assets (bonds, managed futures) on top of existing equity holdings to enhance risk-adjusted returns.
• Idiosyncratic Risk: Risk specific to a single company, versus sector-wide risk.
• Covered Call Strategy: Selling call options on owned stocks to generate income, potentially capping upside potential.
• Disinflation: The rate at which inflation is falling.
• Real Rates: Interest rates adjusted for inflation.
• Core-Satellite Approach: Combining a broad market exposure (core) with targeted investments in specific sectors or stocks (satellite).
• Currency Hedging: Protecting against fluctuations in exchange rates.

Market Call Summary – December 28, 2025 (with Mike Philbrick of Resolve Asset Management)

This segment of Market Call, featuring Mike Philbrick, CEO of Resolve Asset Management, focuses on investment strategies for 2026, emphasizing the need for caution and diversification after a strong market performance in 2025. The discussion covers ETF selection, risk management, and potential opportunities in various sectors.

1. Navigating 2026: Avoiding the “Winning Streak” Trap

Philbrick’s central argument is that investors should not assume 2025’s winning strategies will continue to work in 2026. He warns against the behavioural flaw of “playing with house money,” which can lead to portfolios becoming over-risked. He specifically highlights the growing index concentration – the dominance of a few large companies, particularly in the technology sector – as a key risk. As Philbrick states, “Don’t let the 2025 winners imprison you.”

2. Rebalancing and Risk Management

The first step recommended is rebalancing portfolios back to target risk levels. This involves reducing exposure to high-performing assets like technology stocks and increasing allocations to diversifying assets like precious metals. He stresses the importance of proactively managing risk, stating, “Don’t wait for a pullback to discover that you know you’re a little bit over on your risk budget.”

3. Potential Opportunities in 2026: Volatility and Diversification

Philbrick anticipates increased market volatility in 2026 due to several factors: a change in the Federal Reserve Chair, a potential debt ceiling issue, and fluctuating inflation and growth expectations. He explains that if disinflation (the rate at which inflation falls) outpaces interest rate cuts, real rates (interest rates adjusted for inflation) could rise, potentially hindering stock market performance.

He advocates for diversification as a crucial strategy, not necessarily as a return engine, but as a “ballast” and source of “dry powder” for rebalancing. He introduces the concept of return stacking, layering diversifying assets like bonds or trend-following managed futures strategies on top of existing equity holdings.

4. ETF Specifics & Case Studies

• Cybersecurity Stocks vs. ETFs (HACK & BUG): Responding to a viewer question, Philbrick explains the difference between investing in individual cybersecurity stocks (like CrowdStrike - KR, D, and W) and cybersecurity ETFs (HACK & BUG). He highlights the risk of idiosyncratic risk with individual stocks, citing CrowdStrike’s global outage as an example. ETFs offer diversification, reducing the impact of a single company’s performance. He suggests a core-satellite approach – owning a broad cybersecurity ETF alongside select individual stocks with strong conviction.
• Harvest Tech Achievers Growth & Income Fund (HTA): Discussing a viewer’s question about HTA, Philbrick explains its active covered call strategy, where the fund sells call options on its holdings to generate income. He acknowledges that this strategy caps potential upside but can provide a steady income stream. The fee is 99 basis points.
• iShares Gold Bullion ETF (XMU): Philbrick recommends this ETF as a way to stabilize a portfolio and provide dry powder for rebalancing.
• Global X 1-3 Month T-Bill ETF (CLIP): Recommended for short-term, low-risk cash exposure, yielding around 3.7%.
• BMO Equal Weighted Canadian Oil & Gas Equities Plus Covered Calls Income ETF (NCC): This ETF combines energy exposure with a covered call strategy, providing income and some downside protection.
• Pharmaceutical ETF (PPE): Recommended for exposure to the pharmaceutical sector, benefiting from the AI build-out and potential for innovation.
• Invesco Solar ETF (TAN): Positioned as a “spice” or higher-risk play, benefiting from the increasing demand for energy to power AI infrastructure.
• Vanguard Canadian Government Bond Index ETF (VGB): Recommended for stability and diversification.
• iShares MSCI Australia ETF (XAU): Philbrick suggests caution, noting that Canadian exposure may be more beneficial for capitalizing on the AI build-out.

5. Currency Hedging & Bond ETFs

Philbrick addresses a viewer question about currency hedging in US equity ETFs (VFV vs. VSP). He suggests a balanced approach, potentially holding both hedged and unhedged ETFs to mitigate currency risk. He notes that while currency fluctuations tend to balance out over the long term, significant short-term movements can occur.

6. Leveraged ETFs & Risk

He cautions against the use of leveraged ETFs (like BREMNER or STR), emphasizing the increased risk associated with these products.

7. Top Picks for 2026

Philbrick’s top picks for 2026 are:

• Vanguard Canadian Government Bond Index ETF (VGB): For stability and rebalancing opportunities.
• BMO Equal Weighted Canadian Oil & Gas Equities ETF (ZEF): For exposure to the energy sector and potential inflation hedge.
• Invesco Solar ETF (TAN): A higher-risk, higher-reward play benefiting from the AI-driven demand for energy.

8. Conclusion

Philbrick’s overall message is one of cautious optimism. He believes that while opportunities exist in 2026, investors need to be prepared for increased volatility and avoid complacency. Prioritizing diversification, risk management, and a proactive approach to portfolio rebalancing are key to navigating the changing market landscape. He emphasizes the importance of understanding the trade-offs associated with different investment strategies, such as covered call writing, and aligning investment choices with individual risk tolerance and financial goals.