RBC predicts a price bottom for Canadian home prices. I offer up my wishful thinking on the real estate front. We’re living off of the dividends and leaving a lot of retirement lifestyle on the table. And we’re looking for value for U.S. stocks. The inflation, rate and recession-watch continues. Real estate predictions and more on the Sunday Reads.
RBC thinks the real estate correction in Canada could bottom in the Spring. I spend a lot of time these days looking at the real estate trends of today and yesteryear. It is the most fascinating space in 2022 and beyond. A few weeks ago I looked at the real estate affordability battle in Canada. From the time of that post, rates have been hiked another 75 bps. Borrowing costs (fixed and variable) continue to increase, while home prices are hanging in there in late Summer. Affordability is not improving.
And it is becoming much more challenging to qualify for a mortgage.
There is a lot of scary stuff happening in the real estate market. Even those with fixed rates can get a big surprise.
Investors and recent buyers are getting hurt. It’s just a guess, but I do think homeowner wannabes will eventually get an opening (on the affordability front). It might be modest, it might be significant if we get a recession in Canada. We could get a sizable correction in housing prices while the Bank of Canada will pivot to cut rates to stimulate the economy.
On Better Dwelling: Canadian Real Estate Fueled By Pre-Approvals, “Enormous” Shock Coming.
A real correction would hurt a lot of people, but it would be healthy, and would hopefully bring fair(er) home prices. It may be wishful thinking.
Living off of the dividends
In my living off of the dividends post, you’ll also find a recap of last week’s market activity.
Lance Roberts delivered a nice framing of asset bubbles, valuations and future returns (10 years out). U.S. stocks (S&P 500) are still expensive. That might not stop you from buying on a regular schedule if you’re in the accumulation stage. And you don’t have to buy the large cap, cap weighted market.
The PE ratio for iShares IJR is 12.5%. You can also look to the value indices. I have liked the Vanguard High Dividend VYM for quite some time. There’s better value, more favourable sector arrangement and a solid dividend for the U.S. market.
AT QUESTRADE, YOU CAN BUY ETFS FOR FREE.
Buying less crap
And at times it’s a company report that offers the economic canary in the coal mine. It appears that folks are starting to buy a lot less crap that they don’t need, according to Fedex.
What’s more, FedEx said it expects business conditions to further weaken in the current second quarter, which runs through November. While global revenue this quarter is likely to be flat compared to a year earlier, FedEx’s earnings are expected to plunge more than 40%. Analysts had been forecasting a gain in profit.
FedEx stock slid 21% in one day.
As always, we check in on the Week in Review courtesy of Dividend Hawk. You’ll find the stock stories of the week, dividend updates and the blog reads of the week.
And you’ll find a nice collection of posts on Banker on Wheels.
On Tawcan, we have the inflation-fight battle comparing grocery prices at Costco and Walmart. Costco is your winner. You might consider a membership. All said, I am more than happy to have Walmart in our U.S. stock portfolio. It’s a good inflation hedge, and a recession-friendly stock.
Here is a very useful post on Findependence Hub – 3 stock market terms investors should know. That includes the bid-ask spread. Buying and selling stocks is more than just clicking on that buy or sell button. There’s fresh content on the Hub, Monday to Friday.
On Passive Canadian Income, Rob offers his August portfolio update.
On Million Dollar Journey – How much do Canadians spend in retirement?
The inflation and rate watch
Inflation sinks in, in this Mauldin Report. It’s getting sticky out here.
From that post …
Powell doesn’t want to be another Arthur Burns. I don’t think he necessarily aspires to be Paul Volcker, who was definitely not liked while he was raising rates and tanking the economy, but given his recent speeches and their bluntness, he sounds capable of taking fed funds to 5% if he believes it necessary to defeat inflation.
And that means every monthly release of inflation data that doesn’t support a rapidly falling inflation number is going to create another headache for the market. The last one was almost a 1,300-point down day.
Sticky inflation leads to higher rates. Higher rates will usually cause a recession, though that is not a given.
Once again, stick to your investment plan. Retirees should have already been ready and prepared for any bear markets, recessions and inflation/stagflation.
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