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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.
The Harvest Low Volatility Canadian Equity Income ETF (HVOI:TSX) builds on HVOL’s low volatility strategy. Meanwhile, it overlays an active covered call writing strategy as it aims to generate high monthly cash distributions, while offering stability and a smoother investment experience.
HVOI will be invested in the same broad universe of established Canadian equities and its portfolio will adhere to the risk and fundamental analysis that underpins the Harvest low-volatility strategy. However, that active covered call strategy will enable HVOI to generate the consistent monthly cash distributions that Harvest Equity Income ETFs are renowned for.
Summary
Back in February, we’d discussed that the aggressive trade policy pursued by the new U.S. administration was likely to lead to near and medium-term volatility. That prediction has come to pass as we enter the early portion of the spring season. Fortunately, Canadian investors have options. Namely, there are strong, dependable Canadian companies that can provide strong cover in this uncertain environment.
The Harvest Low Volatility Canadian Equity ETF – HVOL – is a pure low-volatility play that also offers a quarterly distribution that will be derived from the dividend payouts from the underlying 40 equities in the portfolio. HVOI offers access to the same low-volatility portfolio. However, it overlays that portfolio with an active covered call writing strategy to generate high monthly cash distributions, while delivering the same stable, low-risk portfolio.
Ambrose O’Callaghan is Senior Copy Writer at Harvest ETFs. Ambrose brings over a decade of experience in the financial services industry to the Content Editor role. He is responsible for providing context to current trends, developments, and analyses to help make sense of the ETF market and emerging themes. With a strong knowledge of the Canadian equity markets and Harvest products, Ambrose regularly provides commentary on a broad array of market topics.
Disclaimer: For Information Purposes Only. All comments, opinions and views expressed are of a general nature and should not be considered as advice and/or a recommendation to purchase or sell the mentioned securities or used to engage in personal investment strategies. Commissions, management fees and expenses all may be associated with investing in HARVEST Exchange Traded Funds managed by Harvest Portfolios Group Inc. (the “Funds” or a “Fund”). Please read the relevant prospectus before investing. The Funds’ returns are not guaranteed, their values change frequently, and past performance may not be repeated. Tax investment and all other decisions should be made with guidance from a qualified professional.
