Linking Investment Opinions to Actual Solutions
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In a recent blog, we heighted the Market Perspectives - The Year Ahead 2024 where the TD Wealth Asset Allocation Committee (WAAC) shared its view on the current market environment and its position on key asset classes. Armed with these insights, the "do-it-yourself" investor crowd (who prefer to build their own portfolios) have the info they need to make informed investment decisions. This is however, only half the battle.
Once you have the knowledge, then investors need access to the right tools (investment solutions) to execute the plan. As a leading investment manager, TD Asset Management Inc. (TDAM) offers investors access to one of the broadest investment offerings in Canada, including a wide variety of active and passive Exchange-Traded Funds (ETFs) and alternative investments. For this blog, we will review the WAAC views on various asset classes and geographies and provide solutions to help express those views in your portfolio.
Canadian Equities (neutral): The full effect of higher rates on the consumer and real estate markets remains to be seen. As such, the WAAC anticipates that the Canadian economy will slow in 2024. However, strong free cash flows within the Energy sector, and relatively inexpensive Financials stocks, may present attractive opportunities.
- TD Canadian Equity Index ETF (TTP): To help provide exposure to the broad Canadian equity market in a low-cost passively managed fund.
- TD Canadian Bank Dividend Index ETF (TBNK): The ETF offers investors an opportunity to invest in the largest Canadian banks at currently attractive valuations – using a differentiated weighting approach based on dividend growth.
- TD Q Canadian Dividend ETF (TQCD): This ETF can add quality Canadian dividend-paying companies to your portfolio managed using a tested quantitative methodology that does not sacrifice total returns and includes a strong risk focus to help ensure a well-diversified portfolio.
U.S. Equities (modest overweight): The WAAC believes earnings growth is starting to stabilize/show signs of positive momentum and that valuations are more consistent with a slowing growth environment. The year-to-date returns on U.S. equities have been led by a few mega cap stocks. Valuations for the rest of the U.S. equity market are reasonable, which offers potential support for the stock market, even in a modest economic slowdown.
- TD U.S. Equity Index ETF (TPU): To help provide exposure to the broad U.S. equity market in a low-cost passively managed fund.
- TD Q U.S. Small-Mid-Cap Equity ETF (TQSM): Valuations for small & mid cap stocks is currently attractive, when compared to large cap stocks. TQSM aims to provide exposure to a diversified portfolio of small- and mid-cap U.S. companies. By using a quantitative multi-factor approach which seeks to optimize exposure to stocks that are expected to outperform the market by emphasizing certain style factors.
International Equities (modest underweight): International stocks have rallied this year but are challenged by weaker corporate returns and slowing macroeconomic conditions, particularly in Europe. Given this view, we feel that further gains will be more limited.
- TD International Equity Index ETF (TPE): Get exposure to mid- and large-cap stocks in the European, Asian and Far East regions in a low-cost passively managed fund.
- TD Q International Low Volatility ETF (TILV): An ETF of international stocks that utilizes proprietary models which consider the volatility of individual stocks and the correlation between stocks to help create low volatility portfolios that seek to minimize risk.
Alternatives (neutral): Investor appetite within infrastructure remains strong, particularly for energy transition investments and critical infrastructure sectors that tend to generate stable, growing cash flows. In real estate, Canada’s growing demographic profile continues to be supportive of domestic real estate, particularly multi-unit residential. Office properties continue to experience leasing and valuation headwinds and a flight to quality, while fundamentals remain sound across the other property types.
- TD Active Global Infrastructure Equity ETF (TINF): This actively managed ETF invests in publicly listed infrastructure companies from the U.S., Europe, Asia-Pacific and Canada with a focus on not just traditional infrastructure but new age infrastructure as well like servers, payment platforms and exchanges.
- TD Active Global Real Estate Equity ETF (TGRE): An active solution that seeks to provide regular income and growth through investments in real estate companies around the world.
Fixed Income (modest overweight): As the normalization of inflation appears to be slowing alongside waning economic growth, the Bank of Canada (BoC) continues to debate the need to further tighten monetary policy and to reinforce its higher-for-longer policy rate path. On the flipside, this may also imply higher for longer income returns within the asset class. The WAAC continues to believe that fixed income will likely outperform equities over the next 12 months and that bonds can still provide diversification benefits, reduce overall portfolio volatility, and preserve capital.
- TD Canadian Aggregate Bond Index ETF (TDB): As the economy slows, invest in government securities in the long end of the curve to take advantage of duration. TDB can be utilized to get broad exposure to Canadian investment grade government and corporate debt.
- TD Select Short Term Corporate Bond Ladder ETF (TCSB): The fund invests in a laddered portfolio of corporate bonds, with 1-5 years of maturity. Leverage the expertise of the TDAM credit team as they actively manage credit and interest rate risk to deliver an optimal bond portfolio.
Cash & Equivalents (modest underweight): In recent months, the yield on cash and equivalents has risen alongside further rate hikes from the BoC. As key economic data continues to normalize, the risks of additional monetary policy tightening are now more balanced. The WAAC anticipates that other asset classes may present better opportunities for long-term returns.
- TD Select Short Term Corporate Bond Ladder ETF (TCSB): Include this ETF as the short end of a barbell strategy to benefit from higher rates with lower duration.
To view our entire ETF line-up, visit us at td.com/etfs and download our TD ETF Product Guide.
The information contained herein has been provided by TD Asset Management Inc. and is for information purposes only. The information has been drawn from sources believed to be reliable. The information does not provide financial, legal, tax or investment advice. Particular investment, tax, or trading strategies should be evaluated relative to each individual’s objectives and risk tolerance.
Commissions, management fees and expenses all may be associated with investments in exchange-traded funds (ETFs). Please read the prospectus and ETF Facts before investing. ETFs are not guaranteed, their values change frequently, and past performance may not be repeated. ETF units are bought and sold at market price on a stock exchange and brokerage commissions will reduce returns.
The TD Wealth Asset Allocation Committee (“WAAC”) is comprised of a diverse group of TD investment professionals. The WAAC’s mandate is to issue quarterly market outlooks which provide its concise view of the upcoming market situation for the next six to eighteen months. The WAAC’s guidance is not a guarantee of future results and actual market events may differ materially from those set out expressly or by implication in the WAAC’s quarterly market outlook. The WAAC market outlook is not a substitute for investment advice.
The TD Canadian Equity Index ETF is not sponsored, promoted, sold or supported in any other manner by Solactive AG nor does Solactive AG offer any express or implicit guarantee or assurance either with regard to the results of using the Index and/or Index trade mark or the Index Price at any time or in any other respect. The Solactive Canada Broad Market Index (CA NTR) is calculated and published by Solactive AG. Solactive AG uses its best efforts to ensure that the Index is calculated correctly. Irrespective of its obligations towards the Issuer, Solactive AG has no obligation to point out errors in the Index to third parties including but not limited to investors and/or financial intermediaries of the TD Canadian Equity Index ETF. Neither publication of the Index by Solactive AG nor the licensing of the Index or Index trade mark for the purpose of use in connection with the TD Canadian Equity Index ETF constitutes a recommendation by Solactive AG to invest capital in said TD Canadian Equity Index ETF nor does it in any way represent an assurance or opinion of Solactive AG with regard to any investment in this TD Canadian Equity Index ETF.
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The TD Canadian Aggregate Bond Index ETF is not sponsored, promoted, sold or supported in any other manner by Solactive AG nor does Solactive AG offer any express or implicit guarantee or assurance either with regard to the results of using the Index and/or Index trade mark or the Index Price at any time or in any other respect. The Solactive Broad Canadian Bond Universe TR Index is calculated and published by Solactive AG. Solactive AG uses its best efforts to ensure that the Index is calculated correctly. Irrespective of its obligations towards the Issuer, Solactive AG has no obligation to point out errors in the Index to third parties including but not limited to investors and/or financial intermediaries of the TD Canadian Aggregate Bond Index ETF. Neither publication of the Index by Solactive AG nor the licensing of the Index or Index trade mark for the purpose of use in connection with the TD Canadian Aggregate Bond Index ETF constitutes a recommendation by Solactive AG to invest capital in said TD Canadian Aggregate Bond Index ETF nor does it in any way represent an assurance or opinion of Solactive AG with regard to any investment in this TD Canadian Aggregate Bond Index ETF.
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