It was an exciting week in the markets. Most of the big Canadian banks reported earnings, with mixed results. That said, the Canadian consumer and banks are holding up quite well considering the economic tremors that many feel. The earnings represent the state of the nation for the period ending June 30. Ongoing rate hikes and the fall of the Canadian real estate market will weigh in, in future quarters. But the banks cleared the stage on Friday for Fed Chair Jerome Powell who delivered commentary on the fight against inflation. The markets jeered Jerome. The Fed pivot (go easy on rate hikes eh) turned into the big Fed divot.
We’ll get to the big banks in a minute, but first have a look at my Saturday post – The Fed pivot turned into a divot. It was only the stock markets that never got the memo. There was never going to be a Fed pivot. From Michael Kramer of Cott Capital Management …
The futures, bond, and currency markets are already telling the world that there is no dovish pivot, and quite frankly, there probably never was a dovish pivot. The only market out there that hasn’t gotten the message appears to be the equity market.
That post details the very direct comments from Powell – rates are going higher and they are going to stay higher. The Fed claims they are finally going to get serious about fighting inflation? We’ll see about that. They need to get serious and stay serious, but actions speak louder than words. Stay tuned.
More from Mauldin
You can also look to John Mauldin for more thoughts on inflation and stagflation and the Fed commentary.
And on the inflation front, here’s a Tweet and chart that is more than telling. And it perhaps demonstrates why the consumer has to be smacked ‘real good’ to tame inflation.
If you have 55 mintues for Paul Volcker and Ray Dalio.
A funny visual take on ‘things’ this week …
Kyle looks at bank earnings and more
It was a busy week on the earnings front, and that included the Canadian banks. Kyle at MoneySense offered a very good summary of the bank earnings. The banks have already moved into favourable value territory (based on historical averages). I’d agree with Kyle who wrote …
Given their respective valuations, I think they have a lot to offer investors in a volatile environment. The loan-loss provisions might turn out to be needless preparation for a rainy day—in which case the banks will just unwind those reserves to the benefit of shareholders. If the choppy economic waters do begin to sink a few boats, the banks will have yet again earned their reputation as cautious and stable operators.
If the banks fall even more, it is likely a very good time to keep adding. For me they are a key part of the Canadian Wide Moat portfolio. That said, be careful with your allocation levels. I’ve seen some Canadian investors at 70% or more in Canadian financials. That’s risky and reckless, no matter how solid we think are the Canadian banks.
Check out that Canadian Wide Moat portfolio performance update. The wide moat strategy might be tops for putting together the Canadian stock portfolio.
That said, value investing shines in Canada says Norman Rothery at the Globe and Mail. Here’s a chart showing value stocks vs the market and the Canadian high dividend approach.
Have a look at the recent top ten value stocks (by PE ratio) from the TSX 60. That’s a nice mix that includes some inflation fighters by way of energy, Teck Resources and Nutrien.
Scott Barlow shared an RBC analyst’s top REIT picks.
They are …
“Our Outperform-ratings are intact and include Allied Properties, Boardwalk, BSR, CAPREIT, Dream Industrial, European Residential, First Capital, Granite, InterRent, Killam Apartment, Minto Apartment, Morguard Residential, RioCan, SmartCentres, Chartwell Retirement Residences, and StorageVault Canada Inc.”
At Tawcan, Bob (with the help of the blogger at Liquid Freedom 35) looks at boosting your income with options.
The Hawk flies home
And the Hawk is back from vacation with this wonderful roundup of Hawk’s dividends received, the earnings news of the week – plus the Hawk’s favourite reads of the week.
What does it take to consider yourself wealthy? We have have the modern wealth survey on the Weekend Reads at My Own Advisor. Yes, it appears that the wealth bar has been raised.
My take is that with some financial common sense that will lead to a healthy savings rate, most of us should be able to build substantial wealth. We can ‘get there’ by way of real estate and our stock investments.
The weapons might be an all-in-one asset allocation ETF, build your own ETF portfolio, a simple but effective stock portfolio or a managed portfolio by way of a Robo Advisor.
At Questrade you can buy ETFs for free.
And also on this how much is enough front, Jim at Route To Retire asked if a million will tide you over …
How much is enough? Fire away in the comment section. What’s your target?
Fritz at The Retirement Manifesto looks at The Someday Syndrome. A few somedays we’ve all thought about along the way …
- Those early-teen years, when you couldn’t wait to be able to drive.
- Those years as a broke college kid, when you couldn’t wait to make some money.
- Those early twenties, when you couldn’t wait to find the partner of your dreams.
- Those final years of work, when you couldn’t wait to retire.
Another thoughtful post – thanks Fritz.
Delaying CPP and OAS
From Jonathan Chevreau, a look at his latest for MoneySense Retired Money Series – The OAS boost at 75 and deferring OAS and CPP benefits.
And lastly on retirement thoughts, an updated post from Banker on Wheels – why FIRE isn’t fair. Of course, FIRE = Financial Independence Retire Early.
My take is most of the FIRE gang will not be properly prepared for stagflation, inflation and long bear markets and recessions. That said, they’re young. They can head back to work 😉 and most of them will, for many reasons.
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