After several weeks of losses, U.S. stocks staged an impressive rally this week. The S&P 500 was up over 6% for the week. Canadian stocks were up near 2.5%, though Canadian stocks have not suffered in 2022. They are relatively flat year-to-date. Investors were looking to signs that inflation may have peaked and that central bankers might not have to be quite as rate-hike-angry as is mostly feared. The Fed in the U.S. is leaving the door open to a friendlier rate hike path. They will raise rates and read the economic tea leaves. They could back off. Investors were looking for any hopeful signals. Stock markets are back from the dead. But was it a dead cat bounce?
Here is the general investment theme for the week. This was Tweeted on Thursday. Stocks kept surging right through the close on Friday.
And here is a chart showing the sector performance for the week. Folks are piling back into tech as well.
In last week’s Sunday Reads I showed that Canadian stocks were looking good, based on valuations. U.S. stocks were at least becoming a little more civilized on the valuation front.
Clear and convincing
Here’s a good post from Credo Consulting. Credo covers the recent events and offers a bunch of interesting charts. From that post.
Clear and Convincing … what the FED wants to see in terms of inflation coming down …
While the latest FED minutes reinforced the notion that a succession of 50 bps are on their way, it also suggested the possibility of a pause – should incoming data suggest that inflation pressures are abating. In other words … EVEN MORE data dependent than we’ve ever been.
The Fed might get some help. There are signs of economic weakness and supply chain ‘unclogging’, peak inflation and more. A question might be how embedded are some inflationary forces such as energy costs, tight labour markets (wage increases) and the end of globalization? What is obvious is that inflation is driving the bus. If inflation does not kindly retreat, central bankers will have to get serious. And they will have to slay inflation the first time so that we don’t get the rolling waves of inflation that we experiened in the stagflation of the 1970’s.
We can be ready for anything with an all-weather portfolio approach.
Of course, those in the accumulation, wealth-building stage should keep dollar cost averaging. Buy growth assets and keep the portfolio within your risk tolerance level.
Retirement video and Zoom call
I had a blast on the retirement Zoom call that offered a reader Q&A. Thanks again to reader and friend Brent for putting that together. And thanks to the participants.
Both the retirement video and Zoom call are loaded on the YouTube page.
The video offers a basic retirement overview. The key points are that fees are important, you can build your own retirement portfolio and that you should consider paying for advice. It will be money well spent IMHO.
This week I also updated the returns for the all-in-one asset allocation ETFs. I offer the returns for 5 of the leading ETF providers. I also break it down by the 5 risk categories.
Making sense of the markets
At MoneySense, Kyle Provost of Million Dollar Journey is making sense of the week. Kyle covers the Canadian banks who reported earnings and mostly offered more dividend increases this week. They ‘never seem to disappoint’ Kyle suggests. And Kyle wonders if the everything bubble did burst in the recent market correction.
On FiPhysician, Dr. Graham looks at retirement specific risks. That’s a good read.
At My Own Advisor, Mark offers the housing market predictions edition on the Weekend Reads. From that post …
For April 2022, the average home price in Canada’s housing market was $746,146, up 7% from last year. While Canada’s average home price has risen by over $50,000 in the span of one year, home prices have fallen compared to the previous month. March 2022’s average home price of $796,068 means that the average home price in Canada has fallen by over 6% in just one month.
As Mark points out, the cost of home ownership is about to go up. Rising rates will hit spending in many ways. I Tweeted, sharing from a TD presentation.
I have also suggested that it won’t be hard to break the back of the consumer and the real estate market. Scott Barlow shared an interesting chart comparing the recent rate hike cycle (BOCT 7) with the last rate hike cycle (BOCT 6).
Real estate. Look out below?
How much will house prices fall? Only the future knows. Mark’s guess might be quite close if history repeats. I’ll guess a drop of 10% to 15% if the Bank of Canada does follow through with meaningful rate hikes. A little more to fall if we do get a recession.
MoneySense ETF All Stars for 2022
On Findependence Hub, Jonathan Chevreau looks at the MoneySense ETF All Stars for 2022. I am thrilled to be a panelist once again. And for the record I did submit HGRO as my desert island pick. My bitcoin pick last year, (up over 60% in 2021) somehow stuck on the spreadsheet, ha. I can’t change my pick now, as it would look like I’m running away from bitcoin. I’m not. I’ll continue adding to bitcoin in my TFSA. I still hold a 3% position in my RRSP account.
Bob at Tawcan looks at stock market volatility and offers a list of his buys (at depressed prices), in 2020. He offers …
If you’re still in the accumulation phase like us, you should be wishing and dreaming of a bear market!
We always check in with Dividend Hawk for the week in review. You’ll find stock stories and links to the reads of the week in the stock and dividend space.
Canadian dividend stocks
I have also layered in some Canadian energy dividend stocks. I’ve bought a few of them, and ‘made’ another year’s worth of tank fills and driving. That said, I’d have to sell some shares to get a few thousand dollars worth of quick profits. I will hold and collect the dividends, but I am not averse to selling some shares as well if future stock gains get silly. All said, it is a relief (at the pumps) to get free gas.
Also on the dividend front, popular blogger Henry Mah offers how he is generating greater dividend income, compared to Vanguard’s high dividend VDY.
Back to the beach
Here’s a pic from Wasaga Beach. Can’t wait to get up there again.
The sunsets are ridiculous, and unique every night. You never know what you’re going to get, just like the stock and bond markets.
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Consider Justwealth for RESP accounts. That is THE option in Canada with target date funds that adjust the risk level as the student approaches the College or University start date.
RETIREMENT FUNDING PLANNING
The self-directed investor might consider the service provided by Mark Seed from My Own Advisor. He runs Cashflows & Portfolios where they will provide options for that optimal retirement funding strategy. That service is provided for a very reasonable fee.
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