Market Call: Richard Orrell's outlook at Exchange-Traded Funds

Market Call with Richard Oral - Summary (January 26, 2026)

Key Concepts:

• Goldilocks Economy: A scenario with moderate economic growth and stable inflation.
• Tactical Allocation: Adjusting portfolio holdings based on short-term market opportunities.
• Factor Investing: Selecting investments based on specific characteristics (e.g., low volatility, high dividend yield).
• Covered Call Strategy: Selling call options on owned stocks to generate income, limiting potential upside.
• Home Bias: Overweighting domestic investments in a portfolio.
• Hedged ETF: An ETF designed to mitigate currency risk.
• Low Volatility ETF: An ETF focused on stocks with historically lower price fluctuations.

1. Market Outlook for 2026

Richard Oral anticipates a “Goldilocks” approach to the market in 2026, characterized by stable fiscal and monetary policy from central banks. He notes both central bank presidents are content with current rates and don’t foresee immediate changes, a supportive factor for markets. He describes his current portfolio strategy as “sitting on his hands,” adopting a wait-and-see approach following the S&P 500 reaching all-time highs. While volatility remains low (though with a recent uptick), he’s considering adding “tactical items” to his portfolios.

2. Canadian Economy & Growth Drivers

The Canadian economy has proven surprisingly resilient, driven primarily by consumer spending despite recent layoffs announced by various companies. He identifies layoffs as a key risk to positive momentum. Positive fiscal policy from Ottawa, including promised initiatives, could be a significant driver, particularly in the resource, materials, and energy sectors, if Canada can diversify its trade relationships. He emphasizes the need for “shovels in the ground” – tangible progress on infrastructure projects – to translate positive rhetoric into economic growth.

3. ETF Comparison: TD’s ETF Tracks (S&P 500) vs. VFV

Responding to a viewer question, Oral explains that TD’s S&P 500 ETF (TPU) and Vanguard’s S&P 500 ETF (VFV) are very similar, differing primarily in their index providers (Solactive vs. S&P Global). Holdings are comparable, with performance oscillating within a few percentage points over 3-5 year periods. He uses TPU as a core holding due to its slightly lower Management Expense Ratio (MER) but would use VFV for tactical moves to avoid combining cost bases in non-registered accounts.

4. Dividend ETF Analysis: ZDV (iShares) vs. XDG

Regarding iShares’ dividend stock ETF (ZDV), Oral cautions against its concentrated portfolio (approximately 50% financials). He prefers broader sector diversification and suggests iShares’ XDG as an alternative, offering more diversification and some US exposure. He acknowledges the tax advantages of Canadian dividends but prioritizes broader exposure. He suggests allocating around 10% of a portfolio to ZDV as a “strategic sleeve.”

5. Precious Metals Outlook & ETF Recommendations

Oral advises caution regarding a new position in gold or silver, given their recent parabolic rise. He suggests taking some profits. If investing, he recommends the XGD (Global Gold Miners ETF) for exposure to gold and silver mining companies, noting it includes companies like Wheaton Precious Metals. He cautions against solely focusing on bullion ETFs.

6. Fixed Income Alternatives: CBIL & FH S (Franklin Templeton)

For investors seeking safety and a slightly higher yield than money market funds (currently around 2%), Oral suggests considering short-term corporate bonds. He recommends Franklin Templeton’s FH S (short-term corporates) offering a yield in the 3.2-3.3% range, while acknowledging the need for a positive outlook on the Canadian economy. He also mentions the iShares X X as a comparable option.

7. ETF Innovation & Risks

Oral expresses concern about increasing complexity in the ETF market, particularly with innovative products like stock-specific ETFs with covered call strategies. He emphasizes the importance of understanding what you own, as these products can be sophisticated and potentially unsuitable for all investors. He contrasts this with the original, passive, broad-basket approach of early ETFs.

8. International Equity & ETF Picks

Oral is optimistic about international markets, particularly Europe, citing potential for increased fiscal spending and new trade deals (e.g., India-EU). He recommends considering the BMO MSCI EAFE Index ETF (FLV I) for exposure to European markets, noting its low volatility and high dividend yield. He is currently evaluating adding this to his portfolios.

9. US Bank ETF: ZK (BMO) & Covered Call Strategy

Regarding BMO’s US Banks ETF (ZK), Oral notes it incorporates a covered call strategy, which dampens volatility but limits upside potential. He prefers the unhedged Z or ZBIK for greater upside potential, particularly given potential deregulation in the US banking sector.

10. Top ETF Picks (as of January 26, 2026)

• BMO MSCI USA High Quality Index ETF (ZUQ): A core holding (10-20% allocation) focusing on high-return, stable, and low-leverage US companies. He recommends the hedged version.
• Franklin International Low Volatility High Dividend Index ETF (FLV I): A tactical addition to capitalize on potential growth in Europe, offering a combination of low volatility and high dividend yield. He is currently evaluating this pick.
• Global S&P 60 Covered Call ETF (CNQ): A gateway investment for income-focused investors, offering a yield of around 7.5% with moderate equity exposure.

Notable Quotes:

• “We’re almost one month into the new year already, but here’s what I’m looking at… a fairly Goldilocks approach.”
• “I’m keeping my portfolios in line. And I’m maybe looking to add some tactical items here and there which we’ll get into later in the show.”
• “It sounds really great. Sounds very good. You know the Davos speech last week was fantastic. But can we actually get that momentum and get some physical action?”
• “I don’t mind Europe in here. As for the caller’s question as to whether it’s now, I don’t know.”
• “You can’t do it yourself. To hold a portfolio of 60 stocks and call options on each one, it’s nearly impossible.”

This summary provides a detailed overview of the discussion, including specific ETF tickers, yield percentages, and the rationale behind Oral’s investment recommendations. It aims to capture the nuance and precision of the original transcript.