This week I returned to my the column that I previously penned for MoneySense – Making Sense of the Markets. No I did not lose my senses and return to a regular gig, I am filling in for Kyle Prevost who has done a wonderful job after taking over the weekly task. I will also be back “Making Sense” for the week ending July 9th. Kyle is on holidays. Jonathan Chevreau fills in next week.
It was great to be back. And the week offered an aggressive bounce back for U.S. stocks. The major averages wrapped up a big comeback week for stocks. The S&P 500 is up nearly 6.5% for the week, while the Nasdaq Composite gained 7.5%. The Dow is 5.4% higher.
In the weekly wrap I covered the recent economic backdrop. The positive move in U.S. stocks was a market guess that we might have a soft economic landing as central bankers raise rates to whack the consumer hard enough to tempter inflation, while not causing a recession. The ‘choices’ these days might be soft landing, recession or continued stagflation.
You may have heard; inflation is out of control and continues to move in the wrong direction.
Bad news is good news
Funny enough, bad news was good news for the markets. There is hope that the economy will weaken enough on its own, and that inflation will start to come down ‘on its own’, so much so that central bankers don’t have to go ballistic with the rate increases. From that post …
Consumer sentiment hit a record low reading of 50 in June, according to the final reading from a University of Michigan survey released Friday morning. While on the surface that is not positive for the market, investors liked a figure inside the report which showed 12-month inflation expectations by consumers easing back to 5.3%.
Inflation is so misunderstood
Ian McGuggen offered a very good article (paywall) in the Globe & Mail – it’s time to admit that we just don’t know that much about inflation. Economists and central bankers were certainly embarrassed by their inflation predictions over the last 18 months. From that post, here’s a take on the breakdown of what is causing our current bout of inflation.
Trying to sort through this muddle is difficult. A report this week from the Federal Reserve of San Francisco crunches numbers and concludes the biggest factor is supply issues, ranging from shipping delays to labour shortages. These seem to explain about half the jump in inflation over the past year. Demand factors – all that stimulus money – account for about a third. And unexplained stuff fills in the rest.
The rest category would include soaring energy costs. Energy costs can seep into many sectors and businesses to create a lasting impression. Ditto for wage increases. Net, net, the Fed is in a pickle. They have a blunt instrument (rate hikes) that cannot solve most of the sources of inflation. They simply might have to whack the consumer real hard.
No one knows how this plays out. That’s why the all-weather balanced portfolios might make sense for retirees and near retirees. I can tell you from personal experience that it is a relief to not fear the energy crisis or price at the pumps.
We have been travelling down east …
Our $100 fill-ups were paid for by our Canadian energy stock profits.
We are now (unfortunately) back in the GTA – the Greater Terrible Area, ha 😉
Who killed bitcoin?
Editors at MoneySense asked my to address the uh, situation, with bitcoin. After all, I did suggest bitcoin as an investment asset back in early 2021. That is covered in the weekly wrap, with expert commentary from Mike Philbrick of ReSolve Asset Management and Arthur Salzer of Northland Wealth Management.
The investment thesis has not changed. It has only grown stronger IMHO. There are some key insights in the post thanks to Mike and Arthur.
The recent selling by bitcoin miners—who pay their bills in dollars—created a cascade in pricing and has wiped out almost every leveraged position …
I also offer additional energy insights . It is still one of the major investment opportunities over the next decade. I do not see the supply and demand imbalance changing in any major way. Of course, that is not investment advice.
Read. Decide. Invest.
Mutual fund investors are going the wrong way, again
This is a continued theme or event. “Advised” mutual fund holders are selling, as ETFers keep on buying.
Most Canadians are sold high-fee underperfoming mutual funds and receive no advice or poor advice from their advisors. And of course that is why this blog exists. There is simply no need to go that wealth-destroying route.
If you want advice and a managed portfolio, you can consider a Canadian Robo Advisor. You’ll actually find a few solid mutual fund options on that page as well.
You can build your own ETF Portfolio.
There are all-in-one managed asset allocation ETFs.
The greater financial plan is certainly important. But that does not mean you have to pay an advisor a percentage of your wealth each trading day. You can use an advice-only planner and receive conflict-free advice.
And here is how you might invest after you have your financial plan in hand.
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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
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Make your cash work a lot harder at EQ Bank. RRSP and TFSA account savings rates are at 1.25%. You’ll find some higher rates on GICs, recently updated and increased t0 2.05% for short term offerings. They also offer U.S. dollar accounts. We use them, they have been awesome.
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We make between $60 to $70 every month! And that’s on everyday spending. There are no fees with …
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