All posts by Financial Independence Hub

A Case Study in Applied EMH Testing

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Has Trump’s Trade War and associated stock market manipulations altered the Efficient Market Hypothesis?

Image by Pexels: Alisia Kozik

By John De Goey, CFP, CIM

Special to Financial Independence Hub

I have long been interested in the interplay between politics and the stock market. We had a fascinating real world case study that played out in real time back in April.

Those who know me will likely know that I have long been a proponent of the Efficient Market Hypothesis, which was put forward by Nobel Laureate Eugene Fama as a means of explaining capital market behaviour. It comes in three forms: weak, semi-strong, and strong; each representing different levels of market efficiency.

The Weak form asserts that all past market prices and data are fully reflected in current stock prices. Therefore, technical analysis methods, which rely on historical data, are deemed useless as they cannot provide investors with a competitive edge. However, this form doesn’t deny the potential value of fundamental analysis.

The Semi-strong form extends beyond historical prices and suggests that all publicly available information is instantly priced into the market. This includes financial statements, news releases, economic indicators, and other public disclosures. Therefore, neither technical analysis nor fundamental analysis can yield superior returns consistently.

Finally, the Strong form asserts that all information, both public and private, is fully reflected in stock prices. Even insiders with privileged information cannot consistently achieve higher-than-average market returns. This form is criticized because it conflicts with securities regulations that prohibit insider trading.

While the EMH has faced criticisms and challenges, it remains a prominent theory in finance that has significant implications for investors and market participants. It has been both supported and challenged by various market phenomena. Here are some notable examples supporting EMH:

Random Walk Theory

Stock prices appear to follow a ‘random walk,’ meaning past prices do not predict future movements, something that is disclosed and disclaimed on every prospectus.

Index Fund Performance

Passive index funds often outperform actively managed funds, suggesting that markets efficiently price securities, especially once fees are taken into account.

Earnings Announcements

Stock prices quickly adjust to new earnings reports, reflecting the semi-strong form of EMH.

The obvious example that challenges EMH is the existence of stock market bubbles. Events like the Dot-Com Bubble and the 2007-2009 Global Financial Crisis show that prices can deviate significantly from intrinsic values and for prolonged periods of time. Such anomalies suggest that while markets are generally efficient, behavioural biases and structural factors can lead to inefficiencies, include macro-level mispricings. A well-known industry chestnut is that “markets can remain irrational longer than you can stay solvent.”

Here’s where the story gets interesting …

Trump and Market Manipulation?

Donald Trump’s tariff reversal and social media post encouraging stock purchases just before the announcement has raised serious and credible accusations of market manipulation. When you know the market will move based on a Presidential post, telegraphing that move by encouraging supports to buy hours before it is announced is tantamount to insider trading.

Remember that the efficient market hypothesis suggests that stock prices reflect all available information, making it impossible to consistently achieve above-average returns through timing or insider knowledge. Continue Reading…

Canada’s first ETFs using Daily Options

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Hamilton ETFs

By Hamilton ETFs

(Sponsor Blog)

The world of options trading has seen a meteoric rise in a new, fast-paced instrument: the Zero-Day-to-Expiration (0DTE) option.

These options contracts, which expire the same day they are traded, now account for a significant portion of daily options volume. Since their emergence in 2022, 0DTE options have seen their trading volume grow more than fivefold, with over $1 trillion in notional value trading hands each day[1] — underscoring both their rapid adoption and deep liquidity.

Hamilton ETFs is proud to introduce Canada’s first suite of ETFs employing daily options. The DayMAX™ ETFs are designed to deliver higher and more frequent tax-efficient income through the use of 0DTE options and modest 25% leverage, offering a compelling complement to more traditional covered call strategies. The DayMAX™ suite includes:

What are 0DTE Options?

0DTE options refer to options contracts that expire at the close of the same trading day they are traded.

The defining characteristic of 0DTE options is their ability to support income generation every single trading day by monetizing intraday volatility. While the premium on an individual 0DTE option is typically lower than that of a one-month option, the key difference lies in the trading frequency: monthly options can only be written 12 times per year, while 0DTE options can be written ~250 times annually.

Hamilton ETFs

We believe DayMAX™ ETFs are a powerful complement to longer-duration covered call strategies such as our YIELD MAXIMIZER™ ETFs. By combining daily and longer-duration covered call strategies, income investors can diversify across time horizons, helping to smooth cash flows and tap into a wider range of income opportunities. In essence, DayMAX™ adds another tool to your income toolkit, enhancing flexibility and supporting more frequent income generation.

DayMAX™ ETFs — Explore the Lineup

To harness the benefits of this popular and emerging options strategy, this week we launched the DayMAX™ ETFs, Canada’s first suite of daily covered call option ETFs. Trading commenced on Tuesday, July 15, 2025, on Cboe Canada Inc., under the three tickers below.  Designed to generate higher and more frequent tax-efficient income, these ETFs write daily call options while applying modest 25% leverage to diversified equity portfolios.

* Since daily options are currently only available on select U.S. indices, CDAY will write options on the S&P 500 index to carry out its daily options strategy.

** Target Coverage refers to the average portion of the portfolio covered by written options and is actively adjusted based on market volatility to balance income and growth.

DayMAX™ ETFs — Key Benefits Continue Reading…

Simplifying Investing for Financial Independence

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By Billy and Akaisha Kaderli

RetireEarlyLifestyle.com

Special to Financial Independence Hub

Now that 2024 is in the books, I thought I would look back financially to where we started this adventure, from January of 1991. The chart below shows the ascent of the S&P 500 Index over our 34 years of retirement.

On our retirement date of January 14, 1991, the S&P 500 index closed at 312.49. It has recently closed over 6000, making over 8% annual gains plus a couple per cent counting dividends. Hard to imagine, right? With all of the market ups and downs, global turmoil, governments coming and going, businesses expanding and failing, and still producing a better than 10% annual return.

But is this really a one-off period and not the norm?

Using a calculator, we can see that the S&P 500 returns for the last 100 years, including dividends, is 10.660%.

 And recalculating for the last fifty years, total return is 11.411%. Clearly there is a trend here.

Does this mean that every year you invest you are going to have a 10% return? No!

But what it does tell us is that over longer time periods the return on your investment is handsomely rewarded.

However, if we look at the returns since the year 2000 they have been sub par at an annualized rate of just 7.817%.

And finally, since the financial crisis in 2009, the S&P 500 Index produced a total return of 14.934% including dividends.

Investing is not rocket science and does not need to be complicated.

Getting your house in order for retirement or financial independence is not that difficult. Many investment professionals, journalists, and commentators seem to complicate the issue to the point that even we can’t understand it. Safe withdrawal rates, stocks, bonds, balanced funds, commodities, options, laddered portfolios, annuities, offshore accounts, hedge funds, life insurance … are you kidding? No wonder some people are confused and scared!

What’s a person to do?

First, you need to recognize your needs. Let’s be realistic here. How much are you spending now? Not how much do you make a year, but how much are you paying out? With today’s computer online tools and spreadsheets, this is a very easy task to compute.

The longer you keep track of current consumption, the more confident you’ll become of your future spending habits.

Once you know your expenditures per year, take a look at where that money is going. If it’s to pay credit card bills or other consumer debt, you need to pay that off first. It’s fine to use credit cards as long as you completely pay off your balance monthly. And stay out of debt. I know this is not easy, but it’s your future, and the money you were paying in interest can now be invested.

With your debts paid off, you can commit to financial independence. Analysts say a guideline of 25 times your annual capital outlay should be enough to sustain your current lifestyle. With the data you’ve collected in your chart, you can easily calculate a target amount.

It’s really that simple. Continue Reading…

Which Companies will Dominate the Next Decade? Insights from the Past 10 Years

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By Alain Guillot
Special to Financial Independence Hub

If you had invested $1,000 in some of the world’s most innovative companies a decade ago, your portfolio would look vastly different today. The explosive growth of technology-driven businesses demonstrates the power of innovation and long-term investing. Let’s dive into the big winners of the last decade and explore which companies might lead the charge in the next ten years.

The Big Winners of the Last Decade

Here’s how $1,000 invested in 2013 would have grown in some of the most successful companies:

  1. Nvidia: $272,235
  2. AMD: $47,190
  3. Tesla: $29,890
  4. Broadcom: $24,390
  5. Netflix: $19,020
  6. Amazon: $14,685
  7. Microsoft: $9,150
  8. Apple: $9,090
  9. Meta (formerly Facebook): $7,470
  10. Alphabet (Google): $7,225
  11. The S&P 500: $4,017 or about 13.5% per year.

These companies have one key thing in common: they’re all rooted in innovation and operate mostly in the technology sector. They dominate fast-growing markets like artificial intelligence, renewable energy, cloud computing, and digital platforms.

Also, not all of us have the know-how or the time to pick any of those winning stocks, but all of us can easily pick the S&P 500.

What do these Companies have in Common?

  1. Leaders in Innovation: Companies like Nvidia and AMD have revolutionized computing and AI, while Tesla has led the way in electric vehicles and renewable energy.
  2. Fast-Growth Industries: These businesses are in sectors with enormous growth potential, such as semiconductors, e-commerce, and clean energy.
  3. Global Reach: Serving customers worldwide has allowed these companies to scale operations and grow revenue exponentially.
  4. Scalability: Their business models allow for significant growth without proportional cost increases.
  5. Strong Network Effects: Platforms like Amazon and Meta thrive as they attract more users, creating self-reinforcing cycles of growth.

Who will be the Big Winners of the Next Decade?

While the future is never certain, several companies in the S&P 500 are well-positioned to dominate over the next ten years. Here are some categories and potential leaders:

1. Artificial Intelligence

  • Nvidia: Already a leader in AI hardware and software, Nvidia’s dominance in GPUs places it in a prime position.
  • Meta Platforms: With investments in the metaverse and AI-driven advertising, Meta has room for growth despite recent challenges. Continue Reading…

Harvest Low Volatility ETFs: A smoother Investment Experience

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Image courtesy Harvest ETFs

By Ambrose O’Callaghan, Harvest ETFs

(Sponsor Blog)

Canadians in retirement, or those nearing retirement, are faced with unique challenges in the present-day market. Interest rates have moved up from their historic lows since 2022. The benchmark rate for the Bank of Canada (BoC) reached its zenith of 5.00% in July 2023.

Economic headwinds forced the hand of the BoC in 2024 and 2025. The benchmark rate now sits at 2.75% as of July 7, 2025. More rate cuts are expected before the end of the year. This downward trend for interest rates means that investors who want a secure investment while outpacing inflation may have to look beyond GICs and other fixed-income products in this changing climate. Market volatility is another headwind investors are now contending with, spurred on by a new and aggressive U.S. administration.

There was enthusiasm surrounding the broader economy and the stock market coming into 2025. The previous GOP administration cultivated a reputation as a market-friendly one in the late 2010s. That momentum ground to a halt due to the COVID-19 pandemic, but the perception of a market-friendly GOP largely remained.

Investor sentiment soured in the spring, in large part due to the uncertainty surrounding U.S. government policy, particularly when it comes to trade. Trade tensions have remained elevated, but sentiment has improved into the summer as markets have normalized.

Uncertainty in the spring contributed to elevated levels of market volatility. Some names suffered steep retracements in the first half of April. However, the 90-day pause announced on tariffs led to a dramatic reversal. That led to a rapid recovery for the broader U.S. market. Despite the improved conditions, this market is unique in that lingering trade policy uncertainty is fueling negative sentiment. Headline risk will continue to be elevated through the second half of 2025.

A research note from Vanguard earlier this year speculated that volatility was likely to remain. This is due to factors like policy uncertainty, disruptive currents in the economy like Artificial Intelligence development, and the shifting policy of the Federal Reserve.

Demand for Low Volatility products has increased in this environment. These ETFs offer Canadian retirees a pure low-volatility play with exposure to 100% Canadian equities.

Harvest Low Volatility ETFs:  A Smoother Investment Experience

Harvest’s new Low Volatility ETF suite may be appealing to defensive and long-term investors. This approach to equity investing is factor-based, disciplined, outcome-oriented, is designed to mitigate risk, as well as provide long-term growth. Moreover, the suite includes a high-income solution that generates monthly cash distributions through an active covered call writing strategy.

Low Volatility strategies can outperform in bull or bear markets. They follow a portfolio construction and investment strategy that is built to limit downside while capturing the upside. Investors can capture gains more efficiently by minimizing risk during periods of market turbulence.

The Harvest Low Volatility Equity ETF (HVOL:TSX) holds 40 top Canadian equities. These equities will be ranked and weighted by their risk score and market cap weight, with a 4% maximum weight per name. HVOL’s Canadian equities are scored according to risk and fundamental metrics.

Low Volatility – Portfolio Construction

Source: Harvest Portfolios Group, Inc. April 2025.

Low-volatility strategies have existed in the market since the 2007-2008 financial crisis. However, these strategies have typically followed a generic approach.

The Harvest approach utilizes multiple risk metrics to achieve its stated goals. These include Beta, Volatility, and fundamental analysis. Harvest emphasizes a robust portfolio construction to achieve a defensive low volatility portfolio and superior upside capture. Continue Reading…