January 31, 2020 | By: AGFiQ

Strategy Spotlight: Are You Insured?

3 min read

AGFiQ US Market Neutral Anti-Beta CAD-Hedged ETF

On Alert

The S&P 500 Index is near all-time highs and gained almost 30% in 2019, representing its best year of performance since 2013. While the potential for further upside remains over the next year, U.S. market gains could be harder to come by and the prospect of a correction remains heightened at this late stage in the economic cycle.

U.S. stocks have benefited in recent months from the phase one trade agreement between the U.S. and China, as well as the U.S. Federal Reserve’s decision to cut interest rates three times in the second half of last year. It remains unclear, however, if these tailwinds have been fully priced in to the market or whether future earnings growth is enough to support valuations at current levels.

This uncertainty leaves the rally in stocks susceptible to the risk of new headwinds emerging and some defensive areas of the market (i.e. low beta stocks), which can be expected to fall less during a broader selloff, have outperformed lately.

Volatility, meanwhile, tends to increase in late-cycle economies and pullbacks of greater than 5% have become more frequent in recent years. Of the 13 drawdowns of this magnitude over the past decade, four have occurred in the past two years.

S&P 500 Drawdown Periods


Source: Bloomberg and AGF Investments LLC as at December 31, 2019.

Consider Some Insurance

In this environment, opportunities to participate in potential future gains should be carefully weighed against the increasing chance of sizeable losses.

A well diversified mix of stocks and bonds remains essential to finding the right balance, but portfolios that include additional non-correlated asset classes and/or long-short strategies can help mitigate risk even further.



The market neutral strategy provides an effective equity hedge by investing long in U.S. stocks that have below average betas and shorting U.S. stocks that have above average betas, within sectors.

As such, the strategy has the potential to generate positive returns regardless of the direction of broader U.S. market, so long as low-beta stocks outperform high-beta stocks as they have done on several days recently despite new all-time highs.

The commentaries contained herein are provided as a general source of information based on information available as of January 27, 2020 and should not be considered as investment advice or an offer or solicitations to buy and/or sell securities. Every effort has been made to ensure accuracy in these commentaries at the time of publication however, accuracy cannot be guaranteed. Investors are expected to obtain professional investment advice.

AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), Highstreet Asset Management Inc. (Highstreet), AGF Investments LLC (formerly FFCM, LLC), AGF Investments America Inc. (AGFA), AGF Asset Management (Asia) Limited (AGF AM Asia) and AGF International Advisors Company Limited (AGFIA). AGFA is a registered advisor in the U.S. AGFI and Highstreet are registered as portfolio managers across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. AGF AM Asia is registered as a portfolio manager in Singapore. The subsidiaries that form AGF Investments manage a variety of mandates comprised of equity, fixed income and balanced assets.

Commissions, management fees and expenses all may be associated with investing in AGFiQ ETFs. Please read the relevant prospectus or relevant ETF Facts before investing. Exchange-traded Funds are not guaranteed, their values change frequently and past performance may not be repeated. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional. There is no guarantee that AGFiQ ETFs will achieve their stated objectives and there is risk involved in investing in the ETFs. The risks associated with each AGFiQ ETF are detailed in the prospectus. Before investing you should carefully consider each ETF’s investment objectives, risks, charges and expenses. This and other information is in the ETF’s prospectus. Please read the prospectus carefully before you invest. A copy is available on AGFiQ.com

™ The ‘AGF’ logo is a trademark of AGF Management Limited and used under licence.
products and services
Strategies to Mitigate Risk and Volatility

Get Insights Directly to Your Inbox

Expert Commentary on News, Investing, Markets and Finance from AGF's Leading Financial Minds

Subscribe Now
Our website uses cookies to help you get the best experience. Please Accept or click Edit to control your settings.