This week, the Bank of Canada boosted rates by another 0.25% and signalled that they will now pause and evaluate. I’ve been calling that the rate hike hiatus. As I touched on two weeks ago, inflation is moving in the right direction and the consumer is holding up quite well. It’s a Goldilocks scenario, for now. That said, the rate hikes have not worked their way through the economy. In fact, many suggest that we’ve felt almost no economic damage from the rate hikes. There is a lag affect; it can take a year or two for hikes to be felt in full. But let’s call the rate hike hiatus good news.
The big news this week was the announced rate hike hiatus in Canada. Of course, markets are forward “thinking” and they are pricing in a soft landing and rate cuts in 2023. That Yahoo!Finance post suggest that cuts are likely not on the table this year. That would only happen if something breaks and we get a serious-enough recession. Also, inflation would have to be completly under control. The Bank of Canada is not likely to cut rates if inflation is not close to that 2% target.
Rate guesses, not so good …
The consensus appears to be the call that there will be no rate cuts in 2023, though there is a sprinkling of calls for cuts in late 2023. And all said, we should remember the rate predictions from March 🙂 Not even close.
Inflation is so unpredicatable. And inflation might still be driving the bus in 2023.
Coming in for a landing
Lance Roberts looks at the history of soft landing and hard landings. There were 3 past soft landing scenarios, but none in an inflationary environment. The affect of rate hikes have largely not been felt, and likely have had little push on inflation. But that will come over time of course.
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Here’s the chart that shows the positive effect of a weak U.S. Dollar for international equities. With bonds looking better and the potential for international markets, the traditional balanced portfolio might ‘be back’ one day soon.
A Weak Dollar Bodes Well For Non-U.S. Equities – @SoberLook @bcaresearch
Originally tweeted by Rob Hager (@Rob_Hager) on January 24, 2023.
Stacking those dividends
Dividend Daddy knows how to stack and count those dividends.
Here is a popular tweet on the simple basics of wealth creation and the path to financial happiness …
That is “covered” in my personal finance book that is so short that it’s a 1000 word blog post.
Oh look, I just found $888,000 in your coffee.
I should update that post, with inflation if might be closer to a $mil found in coffee and other trivial spending. 😉
My two telcos
In the Globe & Mail David Berman highlights the recent outperformance of my two telcos – Bell (BCE.TO) and Telus (T.TO). And Telus is an analyst favourite. I refer to Telus as a boring telco with an entrepreneurial bent. From that post …
According to RBC’s Mr. McReynolds, Telus is compelling for a couple of key reasons.
It has largely completed the expensive work of installing fibre-optic cable to homes and businesses, which means that the company’s capital expenditures will likely fall 31 per cent this year from last year. That will drive free cash flow to $2.7-billion, or well more than double the estimate of $1.1-billion in 2022, which is money that can be used to pay down debt.
As well, he expects that Telus will see its EBITDA (earnings before interest, taxes, depreciation and amortization, which is a measure of profitability) rise by a peer-leading 10.4 per cent in 2023.
That’s twice the pace of what Mr. McReynolds expects from Rogers, and is partly based on Telus continuing to grab significant internet market share and reporting strong growth in its non-telecom health technology and agribusiness divisions.
The Canadian Wide Moat Portfolio
In that post you’ll find the Canadian Wide Moat 7, and the Wider Moat Portfolio.
More Sunday Reads
On My Own Advisor we have – More Dividends and 2023 predictions.
At Tawcan, Bob offers his December Income and portfolio report, plus the total year summary.
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Here’s the money shot for Bob’s dividend income history. Yes Canadians love their dividends. Bob is a prolific saver and investor.
Here’s the week in review on Dividend Hawk. Many of my U.S. companies have been reporting including Texas Instruments (TXN), Raytheon (RTX) and Johnson & Johnson (JNJ). And next week is action-packed.
Recently I offered an update on the U.S. stocks that I hold in my RRSP account.
My U.S. stocks teach the market a lesson from 2020.
Dale takes early CPP
This week I received my first CPP deposit. That’s our national pension program for American readers – think Social Security.
Be sure to check out that robust thread. It’s a wonderful discussion with tips and considerations and tools for that very important decision. When should you take your CPP and OAS (Old Age Security)? And yes, you should follow me on Twitter.
You might get the folks at Cashflow & Portfolios to run the tables for you. There are so many moving parts.
On stocktrades.ca Dan offers the CPP payments dates for 2023.
On The Hub, thanks to Fritz from The Retirement Manifesto – How real people manage their money in retirement.
Thanks for reading. Don’t forget to follow this blog, it’s free. We’ll see you in the comment section.
Me on TD …
In a TD Bank podcast I will be discussing the all-weather portfolio models. That will be followed up with a live Q&A podcast session.
You can sign up here for the podcast.
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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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I started CPP at 60 for a grand total of $110 a year! However waited until 70 to collect OAS at a 36% premium starting this March. Long story but the short of it is this – We’re frugal and didn’t need the money. They will claw some back but it will take a larger amount of our yearly income before it’s gone … and the threshold for tax year 2023 begins at almost $88,000. Our TFSAs are loaded up with an annual (and growing) $24,000 income. BNS was a bargain in January with a $13,000 contribution.
Thanks Barry, sounds like you are in a very good situation. Congrats.
Why did Dale take CPP early?
Hey Steve, need some of the money these days, but I will be able invest some as well in a TFSA. I have little income so I don’t want to have too many low income years applied, we are allowed 8 to ‘not count’ in calculation. I’m also in a very low tax environment these days.
I recently read one of your posts in which you mentioned a book, on the subject of cdn retirement planning, written by a cdn actuarian / insurance retiree. There were some very good strategies which had been ‘unveiled’. I cannot find the post. Would you please quote that book again? Thanks
Hi Mike, it might have been pensionize your nest egg?
https://cutthecrapinvesting.com/2019/03/07/pensionize-your-nest-egg-with-annuities-your-super-bonds/
Please let me know if that’s not it.
With thanks.
Dale. Thank you 🙂