The U.S. stock market is likely about to offer a rare event, three consecutive years of double digit returns. That hat trick has occurred 9 times over the last 90 years. U.S. stocks offered a 31% return in 2019, in 2020 they kicked off the decade with an 18% return. We are currently over 25% year-to-date for U.S. stocks. What is in store? We’re looking at the double digit return hat trick on the Sunday Reads.
Here’s my latest for MoneySense, Making sense of the markets for the week ending December 12. In that post I look at the hat trick history. From that MoneySense post …
These 3-peat clusters span all the way back to the early 1940s-1950s and mid-1960s to the late 1990s and mid-2000s. The average total return for the third straight year of double-digit gains is 22.8%.
And here’s a surprise on U.S. stocks going on to deliver a 4-peat.
The S&P has registered a fourth straight year of positive double-digit returns four times since 1928. These include 1945 (+35.8 pct), 1952 (+18.2 pct), 1998 (+28.3 pct) and 1999 (+20.9 pct). The average: +25.8 pct.
Does that make sense?
Wowsa! Of course no one knows what will happen in 2o22 and beyond but it does demonstrate that …
At times, making sense of the markets means acknowledging that the markets and market returns don’t have to make sense. Be prepared for anything, even a pleasant surprise.
In my MoneySense weekly I also offered an omicron update. Further to that here’s some potential good news that I found early this morning, in the Globe & Mail quoting Dr. Unben Pillay …
They are able to manage the disease at home,” Pillay said of his patients. “Most have recovered within the 10 to 14-day isolation period.” said Pillay. And that includes older patients and those with health problems that can make them more vulnerable to becoming severely ill from a coronavirus infection, he said.
While we won’t have the final answers on omicron for a few weeks, that is some very positive news, that omicron might be less dangerous, even for those who are older and health-compromised.
In my weekly, I also looked the declining dividend growth of Canadian pipeline stocks, and three lessons from 2021 courtesy of BlackRock.
Executives are selling shares to the ‘dumb’ money
Executives of S&P 500 companies are selling their shares to the dumb money. ‘Dumb’ is how the professional investors refer to retail investors who buy with no regard to valuations.
Company founders and leaders are unloading their stock at historic levels, with some selling shares in their businesses for the first time in years, amid soaring market valuations and ahead of possible changes in U.S. and some state tax laws.
So far this year, 48 top executives have collected more than $200 million each from stock sales, nearly four times the average number of insiders from 2016 through 2020, according to a Wall Street Journal analysis
It rivals the period preceding the dot-com crash of the early 2000’s. Insiders have a long history of selling at peaks and buying in troughs. Hmmmmm?
More Sunday Reads
On My Own Advisor, Mark is looking at dividend mentors and monthly income. One blogger lists her 90 year old Mom as her dividend guru.
On Findependence Hub, Jonathan continues with the must-read series for retirees , with a Q & A with Moshe Milevsky. This week they’re looking at longevity insurance for a biological age. The concept is that your chronological age (your ‘real’ age) is not the most important metric when planning for the retirement risks. We (plus advisors and pension funds) are better to use the biological age that takes health and living conditions and genetics into consideration. The most important metric is – how long are you likely to live? Some 50 year-olds are 65 in biological terms. We can also see the reverse of real ‘aging’.
From that post, and quoting Milevsky.
And you’re going to sit down with your antiquated compliance driven forms that say, “I need to know my client’s age. Oh, you’re 62.”
And, the client says, “Ha, ha. That’s chronological age. We don’t use that anymore, buddy. I use biological age. Sixty-two, that’s not my age.”
It’s about preparing people for the world in which age is not the number of times we circle the sun.
The real risk of rising interest rates
The post also looks at one of the greatest risks to retirees (and to all investors), the threat of rising interest rates. Of course central bankers are planning to increase overnight rates in the attempt to cool inflation. From that same post, in this case quoting The Capital Partner …
Canadian investors currently have over two trillion invested in mutual funds. Over half is invested in balanced funds or fixed income and we’re in a horrible position where fixed income is concerned. We’ve had declining rates for the past forty years. At best, bonds will stay flat. At worst, bonds could lose up to thirty per cent of their value.
Today’s investor has only known a the period of declining interest rates (good for bond prices) and mostly tepid inflation numbers. From Milevsky …
We’ve become accustomed to this declining pattern. Anybody who is younger than forty doesn’t even understand what higher interest rates means. It’s never happened in their lifetime. They don’t believe it. Understand it. Never felt it. You show them graphs going back to the 1970s. That’s not how to convince them. They’re empiricists. They’ve never lived it themselves, they don’t believe you.
As the post offers, inflation-sensitive assets will have to be in the mix to provide you with real income. Of course that is a common theme on Cut The Crap Investing. Stock markets don’t always do the trick in the fight against inflation, though they are a very important asset. And of course, we can tailor our portfolio towards certain types of stocks and bonds that know how to fight that fight.
Once again, please have a read as to what assets work against inflation. You should not be alarmed. Historically it has been quite easy to protect your wealth and retirement from inflation. Will most protect? Nope, not even the advised. Sadly.
But you CAN protect your retirement.
And in MoneySense – types of stocks for modest inflation.
Of course, we have no idea if inflation will pose an ongoing problem. For me, I do not want to make a guess (place a bet) with our retirement on the line. We hedge accordingly.
On Tawcan, Bob offers his favourite top 13 Canadian dividend stocks for 2022. From Bob …
When it comes to picking the best Canadian dividend stocks, it is important to not just look at the dividend yield. Other factors like dividend growth rate, earnings history, company revenue growth, return on equity, and cash flow are also important.
And speaking of dividends, Mike the Dividend Guy looks at the big Canadian banks in a recent podcast.
On stocktrades a very interesting look at the Canadian Dividend Aristocrats.
On GenYMoney a book review of the psychology of money from Morgan Housel.
And of course, review the weekly stock and blog activity on Dividend Hawk. That is always a wonderful roundup.
Dividend portfolio updates
Matthew at All About The Dividends offers his November update.
And Rob at Passive Canadian Income offers up on some mediocre months.
On the dividend and personal portfolio front, we had a perfect dividend growth record through the pandemic. We were 27 for 27, with all stocks in Canada and the U.S. coming through with dividend increases.
Those asset allocation ETFs
Million Dollar Journey updated their asset allocation ETF page. That is a very good post. Recently I compiled and compared the returns of the all-in-one portfolio ETFs with the ultimate asset allocation ETF page.
On Maple Money, a backgrounder on the RESP program in Canada. I was happy to see that they also recognize Justwealth as THE choice in Canada for the RESP. They offer target-date funds that adjust the risk level of the portfolio as the student approaches the education start date.
Justwealth is the smart way to invest in your RESP.
What caused inflation?
It’s time to check in with John Mauldin, one of the favourite economists of Cut The Crap Investing. Here’s a post that outlines what caused inflation and on that subject, this warning …
It will be a massive policy error, much more extreme than the last one, if the Fed doesn’t lean into inflation even if the stock market suffers a short-term retreat. What have we learned over our last 50 years? The market comes back and will be stronger and higher. Valuation will matter. But not if the Fed lets inflation really take hold. Jerome Powell clearly knows the history of Arthur Burns and his successor, William Miller, screwing up. Here’s hoping that Powell is made of sterner stuff.
Mr. Mauldin thinks we should take our stock market lumps and deal with inflation, before it’s too late.
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