Only time will tell if this is the beginning of a new bear market or just a blip.Richard Drew/The Associated Press
The markets are getting twitchy, and investors are nervous.
Wall Street took a hit last week as worries about a punctured AI bubble dominated trading. A strong rally that started on Friday staved off what could have been a panic-inducing plunge and helped restore some measure of confidence, but we aren’t out of the woods yet.
What we’re witnessing is a historic anomaly. November is usually one of the best months of the year for stocks. According to Yardeni Research, the S&P 500 was up 62 per cent of the time in the Novembers from 1928 to 2024. The average gain in the winning years was 4.12 per cent.
What are we to make of the current situation? For starters, last week’s sell-off focused mainly on the tech sector, especially those companies that are heavily involved in AI. Second, as we have noted here on several occasions, the markets were looking expensive – priced to perfection in many cases. In those circumstances, it’s not surprising that some investors decided some profit-taking might be wise.
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So, is this the beginning of a new bear market, or just a blip? Only time will tell. It’s worthwhile to note that, historically, the best month of all for stocks has been December, which has produced gains 72 per cent of the time since 1928. That’s encouraging but clearly not definitive.
What should you do? If you have a well-balanced portfolio, stick with your plan and ride out the slide. If some great values emerge, as they did with the bank stocks in 2008, use some cash to take a position or add to an existing one.
If your portfolio is making you queasy, you may want to make some derisking moves.
Here are four ETFs from our recommended lists that would help achieve that goal.
BMO Low Volatility Canadian Equity ETF (ZLB-T),
Originally recommended Feb. 18, 2019, at $31.53. Closed Friday at $57.30.
Background: This ETF invests in an actively managed portfolio of large-cap, low volatility Canadian stocks. It is rebalanced in June and reconstituted in December.
Performance: After a fall in April, this fund has been climbing steadily and is up more than 20 per cent year-to-date.
Why now? Low volatility stocks normally show less price movements, up or down, than the broad market. So, when the indexes fall, the stocks in this ETF should better retain their value. That doesn’t mean they won’t drop. Just not as much.
Key metrics: The fund was launched in October 2011 and has $5.4-billion in assets under management. The MER is 0.39 per cent.
Portfolio: There are 54 positions in this equal weight portfolio, all Canadian companies. Grocery giants Empire, Loblaw and Metro occupy three of the top four positions. Utilities Fortis and Hydro One round out the top five.
In terms of sector breakdown, 22.02 per cent is in financials, 18.98 per cent in consumer staples, 16.76 per cent in utilities and 12.23 per cent in industrials. Energy, which is the second-largest sector in the Composite, has negligible representation and information technology accounts for only 2.44 per cent of the assets.
Distributions: The fund makes quarterly cash distributions, which are steady at $0.28 a unit ($1.12 a year). At that rate, the yield at the current price is 1.95 per cent.
Tax implications: This is a very tax-efficient fund. In 2024, about 48 per cent of the distributions were treated as eligible dividends, meaning they qualified for the dividend tax credit if held in a non-registered account. About 45 per cent was classed as capital gains. The remaining 7 per cent was treated as return of capital.
Risk: Over the past 11 calendar years, this fund has been down only twice, and both times the declines were minimal. The worst was a drop of 2.83 per cent in 2018. In 2022, which was a terrible year for stocks, this fund lost only a fractional 0.37 per cent.
Conclusion: This ETF offers strong downside protection during stock market sell-offs. It’s a good choice for risk-averse investors.
iShares Core Canadian Universe Bond Index ETF (XBB-T)
Originally recommended on March 5, 2007, at $29.44. Closed Friday at $28.42.
Background: This ETF is designed to replicate the returns of the total Canadian bond universe, including government and corporate issues.
Performance: It’s been a choppy year, but the fund is up a little over 3 per cent so far in 2025.
Why now? Bonds have a stabilizing effect on a portfolio. Studies have repeatedly shown that during bear markets, portfolios with a higher percentage of bonds fare better.
Key metrics: The fund was launched in November, 2000, and has almost $9-billion in assets under management. The effective duration (a measure of interest-rate risk) is seven years. The MER is very low at 0.1 per cent.
Distributions: Payments are made monthly, currently at a rate of $0.08 a unit ($0.96 a year). At this level, the forward yield is 3.4 per cent.
Portfolio: There are 1,813 positions in the portfolio. About 41 per cent of the assets are in bonds maturing in five years or less (lowest risk). At the long end, 22.5 per cent is in bonds with a maturity of 15 years or more (highest risk).
Conclusion: The bond market is reasonably stable right now. If the stock market hits correction mode, the pressure will be on central banks to reduce rates, which should boost bond prices.
iShares S&P/TSX Global Gold Index ETF (XGD-T)
Originally recommended on July 27, 2000, at $24.12. Closed Friday at $44.97.
Background: This ETF tracks the performance of the index of the same name, less expenses. It invests in mining and royalty stocks, rather than bullion itself.
Performance: Stock markets have done well this year. Gold has done better. This ETF is ahead 112 per cent year-to-date.
Why now? Gold is a safe-haven asset. If we experience a severe market correction, demand for the precious metal should continue.
Key metrics: The fund was started in March, 2001, and has $3.5-billion in assets. The MER is 0.6 per cent.
Portfolio: Holdings include some of the world’s top gold producers/streamers including Newmont, Barrick, Franco-Nevada, Wheaten Precious Metals and Agnico Eagle. There are 52 stocks in the portfolio.
Distributions: Payments are made semi-annually, and they vary. The June payout was $0.143 a unit. Over the past 12 months, investors have received distributions totalling about $0.24, for a yield of 0.5 per cent.
Conclusion: Gold has had a strong year but if stock markets crack there could be more profits to come. If you prefer the metal to the miners, choose GLD-N instead.
BMO Equal Weight Utilities Index ETF (ZUT-T)
Originally recommended on Jan. 28, 2016, at $14.12. Closed Friday at $25.55.
Background: This ETF replicates the performance of the Solactive Equal Weight Canada Utilities Index net of expenses. It holds the stocks in the same proportion as they are reflected in the index.
Performance: The fund is 24.7 per cent higher year-to-date, as of Oct. 31.
Why now? Utility stocks offer several advantages in a down market. For starters, they are low volatility because of the nature of the business – distribution of electricity and natural gas. Most of the income is regulated, which means it is not subject to major upheavals. Utility stocks are interest sensitive, so if central banks lower rates in response to a market decline, this fund should benefit.
Key metrics: The fund was launched in January, 2010, and has $813-million in assets under management. The MER is 0.61 per cent.
Portfolio: The portfolio consists of 13 stocks. The largest holdings are TransAlta Corp. (8.4 per cent), Brookfield Infrastructure Partners (8.37 per cent) and Brookfield Renewable Partners (8.29 per cent).
Distributions: Paid monthly at the current rate of $0.07 a unit.
Conclusion: This ETF provides exposure to the biggest Canadian utilities offering modest growth, safe dividends and low risk.
Worried investors can also consider converting some assets to cash, but the ETFs mentioned above offer more upside potential.
Gordon Pape is editor and publisher of the Internet Wealth Builder and Income Investor newsletters.