I have a real nice mix of reads for you today in the Sunday Reads. But first, I will offer up a framing of the economic situation as it sits today. And I have some very interesting charts to share. 2022 is about that battle between solid economic growth and growing earnings and revenues from companies in the U.S., Canada and around the globe, vs rate hikes. It’s growth vs the Fed and other central bankers. In my MoneySense column, I looked at the rate hike cycle that will likely begin in Canada next week. And it was week two of earnings in the U.S.
Here’s the link to Making Sense of the Markets on MoneySense. That post is a good chart-fest in its own right. Here’s a taste in reference to solid earnings prospects for U.S. stocks. Analysts are expecting even greater growth in the Canadian market for 2022. That is largely thanks to energy, financials and materials.
And on the economic growth front – Canada’s gross domestic product will surge an impressive 4.4 per cent this year, while its U.S. counterpart will grow an equally impressive 4.1 per cent, according to TD Economics.
Once again that MoneySense posts also delves into the Canadian rate hike cycle, will earnings revisions trump rate hike fears?, and a look at emerging markets that might offer wonderful value and long term potential.
Those great charts
Here’s more quarterly framing of the earnings history and prospects, for U.S. stocks (S&P 500).
And here’s a table that frames the market corrections from the end of the great financial crisis.
Who knows where our current correction will settle on the above table. And just for fun, here’s a longer term look. Nobody knows what will happen, but it might be prudent to remind investors that real and lasting corrections can occur.
Framing the bulls and bears. Courtesy of Questrade. Bulls beat the bears over time of course, we just have to be patient and stay the course. Remove the emotion as much as possible. Be sure that you are investing within your risk tolerance level.
Major intraday reversals (as we had yesterday, January 24) are a sign of bear markets. Be prepared, there may be more to come.
And here’s one for the road.
More Sunday Reads
Should you rebalance your portfolio in retirement? That is a very solid post from Dr. Graham at FiPhysician.
Of course, you remember Dr. Graham from this post …
How does the global pandemic end? With a cold.
Who knew that we would (most likely) end the pandemic so soon, in 2022. We can ‘thank’ Omicron and the miracle vaccines for that. Of course, I made that end of the pandemic suggestion a few days after the announcement of Omicron as the new and highly prolific variant of concern. Just saying 🙂
Equity glidepath
You can remove sequence of returns risk (entirely) by going very conservative as you begin retirement. You would then increase your stock allocation (and growth potential) in retirement. That is called a retirement equity glidepath.
On My Own Advisor we have the high savings rate weekend reads edition.
On The Hub John DeGoey addresses inflation and uses an interesting analogy to frame the pickle that central bankers might be in as they try to tame inflation by raising rates. But John, does not use a pickle, but a ladder.
As your friend ascends, it eventually becomes clear to you that communication has been lost: your friend is now so far up that they cannot hear your pleas to reverse course. It’s dangerous. You know it, but your friend keeps climbing higher.
Also on The Hub, I enjoyed this post – out of the fire and into the frying pan.
The market is risky, Rob at Passive Canadian Income says it’s time to put your money to work.
On Tawcan, Bob provides his December update and 2021 investment summary.
Bob runs a very successful portfolio. While he tracks the dividend income, it is the total return that will likely deliver more income and a more prosperous retirement (compared to the dividend income).
And speaking of charts and dividends. Stocks didn’t work for stagflation, and neither did dividends.
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Banker On Wheels looks at Money Explained, the Netflix series.
And Banker on FIRE offers a better way to FIRE.
As always, what a great weekly roundup on Dividend Hawk.
We look at RESP strategy on Million Dollar Journey.
A great option (OK, THE OPTION in Canada) is the RESP portfolios at Justwealth.
And on the retirement front, on this site, I had a look at ETF portfolios for retirement funding. There is a very robust mix of retirement topics covered in that post.
Thanks for reading. Please leave a comment with your ideas, concerns or questions. Or feel free to send me a note by way of that contact form.
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Hi Dale: Thanks for all you do. If one was to subscribe to the theory that later this year we will be going to a period of stagflation, how would you position yourself, ie. sectors and individual stocks and etfs?
Hi Tom, I think it’s a different consideration if you are in the accumulation stage with decades with the ability to ride things out. Buy good growth assets. And that is compared to being in retirement or in the retirement risk zone.
But if you need to protect, you can have a read of ‘what works for inflation and stagflation’…
https://cutthecrapinvesting.com/2021/09/12/how-to-protect-against-inflation-on-sunday-reads/
Of course no one knows if inflation will be persistent, or if stagflation will show up.
We might simply be positioned and ready for anything. That means the all-weather portfolio approach. We’d include some commodities, gold and REITs for inflation. We have to play defense as well. We need some good defensive assets in the mix with bonds and defensive stocks and sectors.
Please feel free to reach out again vie this thread, or send me a note.
Dale