Hey there. Most of the time, this news is well baked into the markets. Rising rates have clearly fueled REITs and financials this year. For example, we rebalanced all of our portfolios back in February 2021 on fears of inflation/increasing rates and added more REITs. They've been some of the best-performing assets of 2021.
That being said, I have bumped my financial exposure over the course of 2021, as I feel Canadian banks and insurance companies are in a strong situation to outperform moving forward. Rates rising next year, if Omicron doesn't wreak havoc, could be an added tailwind and while the news is baked in, stronger than expected results could continue to fuel prices.
The illusion that covered call ETFs hedge volatility is one that a lot of passive income promotors like to speak on, but it's just that. An illusion. If we look to the max drawdowns of many covered call ETFs, they are on par with their non-covered call counterparts. One thing that gets overlooked a lot is the fact that outflows/inflows can impact an ETFs price significantly. During a crash type situation, outflows will be excessive, and prices will fall.
It doesn't benefit retail investors much at all to obsess over cyclical rotations in their portfolio. Look at our list of Foundational Stocks. Despite containing 2 utility plays in Fortis and Brookfield, a telecom play in Telus, and a high growth tech play in Constellation Software, all of which should theoretically struggle in a rising rate environment, that list of stocks is outperforming every major index in North America.
Strong companies prevail regardless of the economic environment. If you deploy a simple strategy of buying strong companies and holding them for the long term, you'll be better off than 95% of retail investors.