South of the border the Fed ratcheted down the rate hikes, and offered a more modest 0.25% hike. Fed Chair Jerome Powell then offered a somewhat confusing or dismissive press conference. Powell had no problem waving his red cape to call out the stock market bulls. And show up they did. U.S. stocks were up over 2% for the week, even after giving up 1% on Friday. The more growth-oriented Nasdaq 100 was up more than 4.3% for the week. Canadian stocks were up just 0.6%. Jerome Powell calls on the bulls in the Sunday Reads.
Here’s a video (Tweeted) that demonstrates the moment when the bulls entered the ring.
Are we there yet?
Here’s my brief summary (guess) as to where we are today.
The Fed actions have likely had almost no effect upon inflation. See the consumer and employment. Financial conditions are now accomodative. But cracks are showing in the economy. The Fed might be true to their word that rates will go higher, and stay there longer. Higher for longer is the ‘promise’. The rate hike lag affect might be truly long this time. If the Fed is serious about bringing inflation to 2% target they will have to hang in there long enough (and with rates high enough) to hurt the consumer (employment) and the economy.
The strong Friday jobs report was terrible for the Fed and the inflation fight.
Things are moving in slow motion, start there. The stock markets do not believe the Fed. Or the stock markets and the Fed are guessing that we’re on the path to a soft landing.
The bond markets predict recession. There are too many moving pieces to know how this plays out. It doesn’t matter for an accumulator – lower prices are good. Retirees, and those within several years of retirement, might want to be ready for anything with an all-weather portfolio model.
It appears that we will at least get a soft recession. There is likely more chance of that in Canada as we are much more sensitive to higher rates. We are more indebted than most any other developed nation. Our real estate sector should take it on the chin.
John Mauldin says it’s a muddle-through market for now.
So economically, I’m on the slightly pessimistic side for 2023. Today we’ll talk more about my market outlook for the next year or so. The answer may be disappointing if you want me to be either bullish or bearish. I am neither, at least for now. My best guess is we’ll have kind of a “muddle through” year, featuring moments of both terror and euphoria on the way to relatively minor change.
Four incredible growth stories
Heres’ a look at some of the most successful and profitable companies on earth. Amazon was a victim of its own pandemic success. It looks like they overbuilt and now have to adjust to a weaker or more normalized economy. The have left the profitable list.
We hold Apple and Microsoft in our U.S. stock portfolio.
From dividend days to dividend daze ?
Here’s a wonderful post from Purpose Investments that explains (perhaps) why dividend investing has outperformed the markets over the last few decades.
I am a big fan of dividend investing, but we should certainly consider why it worked. I am still committed to the higher dividend approach in Canada, and the higher dividend growth approach for U.S. stocks.
That said, I continue to point out the fact that the broader wider moat Canadian stock portfolio (that includes more sectors and lower yielders) is superior to high dividend.
Core ETF portfolios perform
Of course investing is personal and not everyone wants to or needs to embrace the almighty dividend 😉 Passive core index investing has historically worked very well for the accumulation stage. I’ve updated the performance to the end of January for this post.
And the good news is that with higher rates in competition with dividends investors have options. Bonds are paying a reasonable rate. And so do high interest savings accounts. For too many years, folks thought you were high if you used the worlds “high interest” in Canada. I’ve updated the EQ bank savings and GIC rates.
Here’s my EQ Bank review that includes rates and the savings and insurance rules in Canada.
The rolling returns for U.S. stocks
Here is a fascinating series of charts showing the rolling 10-year returns for U.S. stocks, including the source or cause of the returns.
What that chart shows is that returns are never average. Also, periods of higher returns are followed periods of more modest or lower returns.
More Sunday Reads
Mark is away on vacation (again, ha) but he did manage to squeeze out a Weekend Reads. It’s the dividend raises and vacation edition. Are those two events related Mark? 🙂
A portfolio udpate from mypredentlife …
We always check in with the Dividend Hawk for the weekly wrap – stock stories, earnings and top blog posts. In the mix …
- BCE reports Non-GAAP EPS of C$0.71, missing analyst estimates by C$0.01 and decreasing 6.6% year-over-year. Revenue grew 3.7% to C$ 6.44 billion, topping estimates C$ 50 million. For FY23 Management guides Revenue growth of 1% to 5, Adjusted EBITDA growth of 2% to 5%, Adjusted EPS growth of (3%) to (7%) and Free cash flow growth of 2% to 10%.
- BCE Inc. (BCE) Increased Dividend; BCE’s Board of Directors has declared a quarterly dividend of C$0.9675 per common share, an increase of 5.2%, payable on April 17, 2023 to shareholders of record at the close of business on March 15, 2023.
There’s a fresh post Monday to Friday on Findependence Hub. I’ll leave it to you to find your favourite. There’s a nice mix this week.
Dividends and retirement
On Tawcan, Bob offers his 2022 goals and updates.
On FiPhysician, a very important consideration: finding yourself in retirement.
A fascinating chart comparing emerging markets to Canadian stocks.
There are many projections that Canada will not be able to keep up in the future. Emerging markets are getting some very good press these days. That may be where they keep the favourable demographics and growth potential. And obviously, emerging markets outperformed for most of the period in that chart.
And BoA continues to like Canada over the U.S.
On stocktrades.ca, Dan offers 3 Canadian healthcare stocks to consider. None of them cannabis stocks, thank goodness.
Banker on Wheels steers us toward some great reads including how to protect your portfolio with commodities by way of Vanguard.
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When you Cut The Crap investing …
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CANADA’S TOP-RANKED DISCOUNT BROKERAGE
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RETIREMENT FUNDING PLANNING
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OUR SAVINGS ACCOUNTS
Make your cash work a lot harder at EQ Bank. RRSP and TFSA account savings rates are at 2.0%. You’ll find some higher rates on GICs, recently updated and increased to 3-4%. They also offer U.S. dollar accounts. We use EQ Bank, they have been awesome.
OUR CASHBACK CREDIT CARD
We make between $50 to $70 every month! And that’s on everyday spending. There are no fees with …
Last month we received $75 in cashback cash. We are spending too much, ha.
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