It’s no secret that we are all fed up with this pandemic. And I can’t believe how long it has been since the first modern day pandemic has consumed our thoughts and shaped our lives. I first wrote about the pandemic on February 1, 2020, just as the virus was setting up shop in North America. It was no growing concern at the time. And while we’re not out of the pandemic woods, it appears that we in Canada will soon get to the other side. The variants are certainly the wild card. Ditto (brighter days) for the U.S., the U.K. and Europe and much of Asia. We all can’t wait to move on, and get back to ‘normal’. That new normal might also include the new minted retail investors taking the Summer off.
The retail investor became a force in 2020. Bored and at home, many turned to stock investing. The pandemic brought on board many new investors and many younger investors as well. I covered the fascinating Redditors army in my MoneySense posts.
The Redditors are still out there, but their enthusiasm has certainly cooled.
That spirit may move well beyond the Redditors.
You don’t impress me much.
And there are many signs that general investor enthusiasm and activity has waned. The retailer and perhaps most of the market makers are not even impressed with very positive earnings results.
And as Liz Sonders of Charles Schwab suggests, perhaps all of that good news was priced in – helped along by the investor enthusiasm throughout 2020.
And perhaps many years of good news was already priced into the U.S. markets. It’s the opinion of many market pundits that the U.S. markets will have very modest returns or no real returns over the next several years or decade. That was a theme of yesterday’s post …
And here’s a quote from Liz Sonders …
S&P 500 companies are reporting the best quarterly results in at least a decade, with year-on-year earnings growth of more than 50%. Some 87% of companies so far have beat estimates, the largest amount since Refinitiv began tracking the data.
The stock market has been largely unmoved by the torrent of good results, suggesting bullish investors had priced in a strong recovery even if more timid analysts had not plugged one into their forecasts. Having both risen roughly 10 per cent between the start of the year and the start of earnings season, the S&P 500 and the Stoxx 600 have since traded flat.
And this shift in sentiment has been mentioned in many corners, where the professional managers have been selling their high flying U.S. stocks, the retail investor was the buyer.
I would guess that we might be seeing the early stages of the retail investor ‘curbing their enthusiasm’. After all, there might be more interesting things to do this Summer, such as live life to the fullest. Trading apps might be replaced by Airbnb, Tripit and Urbanspoon.
The dog days of Summer.
Anything can happen, but I would not be surprised to see stocks slide (especially U.S.) in the dog days of Summer.
Speaking of dog days, this week we said goodbye to our family pet, my best bud, and office assistant. Sampson preferred the title of “Office Manager”. Sure, OK, who is going to quibble over a few kibbles?
We should all look so good at 100. Miss him tremendously.
The Sunday Reads.
On My Own Advisor here is Mark’s Weekend Reads – the financial independence drawdown strategy edition.
GenYMoney offers a review of the 2.0 of Wealthica, a portfolio and net worth tracking tool. It can also help you budget and keep track of your spending and spending patterns.
Here’s the outline of Wealthica from their CEO and co-founder Simon Boulet …
Wealthica is a free online tool that allows investors to see all their investments in a single dashboard. We connect to your financial institutions every day and pull your account balances, holdings and transactions. Wealthica is the largest financial aggregator in Canada and the only aggregator specialized in Canadian investment accounts. Our proprietary aggregation technology allows connecting and importing data from 80+ Canadian financial institutions and investment portals.
On Findependence Hub, two new thematic growth-oriented offerings from Invesco.
Invesco NASDAQ Next Gen 100 Index ETF (QQJR and QQJR.F) and the Invesco NASDAQ 100 Equal Weight Index ETF (QQEQ and QQEQ.F. As the release says, these funds “build on the innovative solutions offered by Invesco and Nasdaq, allowing clients several distinctive entry points to own the disruptive companies listed on The Nasdaq Stock Market.”
When equal weight indices deliver their outperformance.
And on the Maple Money podcast a very important subject, what investors need to know about emerging markets. That is certainly an underappreciated and underweighted area for Canadian investors.
This week on MoneySense I looked at Canadian bank earnings, the bitcoin energy use ‘problem’, Canadian stocks on the march, and gold has its shine back.
On The Retirement Manifesto, 10 steps to make sure that you have enough money to retire.
Two of the Canadian banks made it into the 2021 Beat The TSX Portfolio, hypothetical ticker BTSX. You’ll simply have to buy the individual stocks if you want to replicate that simple 10-stock market beating approach.
Mike The Dividend Guy offers some common sense on yield on cost – it’s a feel good metric. Yield on cost looks at your current yield as a percentage based on your initial investment. YOC will factor in dividend growth and the reinvestment of any dividends. When calculating you YOC you would also need to factor in any new monies invested in that stock. That is, you would have an average cost per share for that stock.
Deflation on the economic chatter front.
And it’s time once again to check in on one of our favourite economists, John Mauldin.
Here is deflation talk. Yes, deflation can scare economists and investors as much or more than meaningful and lasting inflation. Here’s a key chart and commentary. It is a theme I have mentioned in this space, and in MoneySense, upon many occasions.
Debt suppresses growth .
If you could ask the world’s top central bankers what really terrifies them, I think the honest answer would usually be “deflation.” It is their greatest nightmare. They think a little inflation is good (thus the 2%+ target), and they’re confident they can subdue it if necessary. Deflation is a bigger problem.
Let’s note, however, that these aren’t either/or conditions. They have degrees of severity. Indeed, the last four decades we’ve seen disinflation—a mild form of deflation—in many segments of the economy. Compared to that, even relatively mild inflation looks quite concerning.John Mauldin
Once again, most Canadian advisors and investors are betting or guessing that the last four decades of a disinflationary environment will continue. That’s a big bet if someone is in retirement or is approaching retirement and within the retirement risk zone.
How many investors and advisors are truly prepared for a shift in economic conditions? It’s a small percentage from my observations. Here’s a good read and simple demonstration of a portfolio that is ready for any economic condition – the permanent portfolio.
One can do better than the permanent portfolio of course. An investor could likely do better even while sticking to a four asset or four ETF portfolio.
Here’s a mix I ‘came up with ‘ while fooling around on portfoliovisualizer.com
It’s a little light on the inflationary protection hedge fund friends would likely offer.
All said, I think that is very solid for a 4-ETF offering. More balanced for economic conditions might look like …
Support your portfolio and Cut The Crap Investing.
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Consider Justwealth for RESP accounts. That is THE option in Canada.
At Questrade, Canadians can buy ETFs for free.
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Make your cash work a lot harder at EQ Bank. RRSP and TFSA account savings rates are at 1.3%.
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