Richard Orrell, portfolio manager at RN Croft Financial Group, shares his outlook on Exchange-Traded Funds.
Richard Orrell, Portfolio Manager, RN Croft Financial Group
Focus: Exchange-Traded Funds
Top picks: BMO MSCI USA High Quality Index ETF, Franklin International Low Volatility High Dividend Index ETF, Global X S&P/TSX 60 Covered Call ETF
MARKET OUTLOOK:
The start of 2026 has been defined by a ‘goldilocks’ market environment: conditions are neither too hot nor too cold, providing a particularly strong tailwind for small-cap stocks. As earnings season unfolds, many companies are surpassing modest expectations. Despite persistent sensitivity to geopolitical headlines, market volatility remains notably contained, with the VIX reflecting a stable investor sentiment.
Key Economic Drivers
The global landscape is currently undergoing a significant rewiring of trade relationships, as observed by recent trade deals between partners like Canada-China and the EU-India. Supporting this transition is a favorable macroeconomic backdrop:
- Financial conditions : Policies remain non-restrictive.
- Monetary policy: Global interest rates are trending downward.
- Liquidity: Trillions held in money market funds may soon seek higher returns in equities as rates fall, potentially fueling the market’s next leg up.
Critical Risks to Watch
While the outlook is optimistic, the labor market requires vigilant monitoring. Although the current job market isn’t ‘dire,’ an uptick in layoff announcements during earnings calls could signal future trouble. Because consumer spending drives the bulk of the U.S. and Canadian economies, a tipping point in unemployment would pose a major threat. Furthermore, while robust U.S. GDP figures suggest a low immediate recession probability, any market pullbacks should be cross-referenced with credit spreads. Widening spreads would be the first indicator of a liquidity crisis, which remains the primary gateway to a broader economic downturn.
TOP PICKS:
Richard Orrell’s Top Picks: BMO MSCI USA High Quality Index ETF, Franklin International & Global X Richard Orrell, portfolio manager at RN Croft Financial Group, shares his top stock picks to watch in the market.
BMO MSCI USA High Quality Index ETF (ZUQ TSX)
The fund invests in U.S. equity markets, while screening for high return on equity (ROE), stable year-over-year earnings growth and low financial leverage. Issuer weights are capped at five per cent. The US market continues to be the broadest in the world and companies have global revenues. The high-quality screen tends to outperform the S&P 500 over longer time frames. I like the hedged version due to concerns about the U.S. dollar. The largest holdings are Meta, Eli Lilly, Google and Nvidia. This ETF does have a small exposure to mid cap companies. It’s a core holding in my investment models.
Franklin International Low Volatility High Dividend Index ETF (FLVI CBOE)
I like this ETF as it adds a different investment style to many portfolios that have appreciated due to the AI theme. I see this ETF as a compliment to U.S. themed ETFs. Although the ETF is relatively new, it has attracted 177 million in assets since it’s debut in March of 2024. The ETF strategy merges the factors of high dividends and low volatility across the universe of stocks outside of North America. This ETF has performed well in the past year (as of 12/31/2025) with a return of 33.72 per cent. It’s unlikely that that type of performance will continue even as countries diversify trade and European budgets increasing. The P/E valuations in the ETF of 13.73 times on a 12-month trailing basis which is low compared to the S&P 500 or Nasdaq. The management expense ratio is currently discounted to 0.25 per cent from 0.40 per cent until June 30, 2026. The ETF does have trading costs of 0.27 per cent so the all in expenses are currently 0.61 per cent as per the latest available funds facts.
Global X S&P/TSX 60 Covered Call ETF (CNCC TSX)
The ETF is a strategic choice for investors that want to hold the top 60 largest companies in Canada and generate extra income at the cost of capped upside. It pays the distribution monthly (currently around 7.5 per cent). The cost of managing an options strategy for the normal investor is complex so this ETF wraps that up in one package. You get exposure to the CA banks, energy, and materials companies. This is a good ETF for income focused investors.
DISCLOSUREPERSONALFAMILYPORTFOLIO/FUNDZUQ TSXYYYFLVI CBOENNNCNCC TSXNNN
PAST PICKS: JULY 22, 2025
Richard Orrell’s Past Picks: Invesco NASDAQ 100 Index ETF, Global X AI Semiconductor & iShares Richard Orrell, portfolio manager at RN Croft Financial Group, discusses his past stock picks and how they’re doing in the market today.
Invesco NASDAQ 100 Index ETF (QQC.F TSX)
Then: $180.64
Now: $200.67
Return: 11%
Total Return: 11%
Global X Artificial Intelligence Semiconductor Index ETF (CHPS TSX)
Then: $44.57
Now: $61.51
Return: 38%
Total Return: 38%
iShares Core S&P 500 Index ETF (CAD – Hedged) (XSP TSX)
Then: $64.87
Now: $70.59
Return: 9%
Total Return: 10%
Total Return Average: 20%
DISCLOSUREPERSONALFAMILYPORTFOLIO/FUNDQQC.F TSXYYYCHPS TSXNNYXSP TSXNNY
