The hosts discuss the U.S. Federal Reserve's recent rate cut and its market implications. They highlight 10 key ETFs to watch for 2025, emphasizing strategies to hedge against major players in the S&P 500. The conversation shifts to gold investments, showcasing its potential as a hedge against currency volatility. They examine various ETF strategies, focusing on performance during market fluctuations and comparing energy ETFs. Additionally, the benefits and risks of a leveraged utilities ETF are explored, providing insights for cautious investors.
The U.S. Federal Reserve's recent 25bps rate cut reflects a cautious strategy amid persistent inflation, influencing market volatility significantly.
Investors should consider the ten highlighted ETFs, including the BMO Gold Bullion ETF, focusing on personal research and risk assessment.
The discussion emphasizes the risks associated with leveraged ETFs, particularly in volatile sectors like utilities, advocating for a clear investment philosophy.
Deep dives
Impact of US Federal Reserve Rate Cuts
The discussion highlights the recent decision by the US Federal Reserve to lower the federal funds rate by 25 basis points, contributing to a total of 100 basis points cut for 2024. The current rate now stands between 4.25% and 4.5%, significantly lower than Canada's 1.75% cut. Such a change has stirred market reactions, with the S&P 500 experiencing a drop of over 3%. Key insights include that the Fed is adopting a cautious approach to further rate cuts, primarily focusing on ongoing inflation trends, which remain above the desired 2% target.
Volatility and Market Behavior
The episode elaborates on market volatility following the Fed's announcement, particularly the significant fluctuation in Bitcoin prices, which saw a drop of up to 13%. The hosts explain the concept of liquidations in the crypto market, where leveraged positions can trigger sudden price drops during sell-offs. They remind listeners that volatility is inherent in assets like Bitcoin, suggesting that only those who can withstand such swings should consider investing. The discussion also touches on the broader implications for equity markets amidst changing interest rate environments and economic conditions.
ETFs on the Radar for 2025
The hosts discuss ten ETFs of interest for 2025, emphasizing the growing number of new ETF issuances in the market. Among them, BMO Gold Bullion ETF is highlighted for its low fees and as a viable way to invest in gold without physical ownership. They stress the importance of conducting personal research on such funds, especially considering the fluctuating roles of gold in portfolios as protection against fiat inflation. The conversation extends to passive investment strategies and the need for investors to remain discerning amidst a saturation of investment options.
Defining Strategic ETF Choices
Detailed comparisons are made between various ETFs, including low-volatility options and fundamentally weighted funds. For example, the BMO Low Volatility Canadian Equity ETF is noted for providing better risk-adjusted returns than traditional index funds, appealing to investors looking for stability. The discussion extends to the importance of understanding the underlying security selection strategy of each fund, emphasizing the potential over-concentration in popular ETFs. The hosts advocate for a balanced approach to ETF selection, aligning with personal investment goals and risk tolerance.
Evaluating Risk and Reward in ETFs
The episode explores the allure of leveraged ETFs, particularly those focused on sectors like utilities and energy. The Hamilton Enhanced Utilities ETF, for instance, employs a conservative leverage strategy intended to benefit from falling interest rates, though it comes with increased volatility. The hosts caution against the inherent risks of investing in leveraged products, especially for long-term holdings. They conclude that understanding one's investment philosophy and tolerance for risk is crucial before choosing to invest in these potentially volatile funds.
In this episode, we dive deep into the U.S. Federal Reserve's latest rate cut announcement, bringing the fed funds rate down by 25bps for their final decision of the year. We discuss why markets reacted sharply to the news and what it means for investors.
We also spotlight 10 ETFs to watch for 2025. From strategies to hedge against the "Magnificent Seven" in the S&P 500 to leveraging rate-sensitive sectors like utilities, we cover it all.
