It was quite the week, and I was back at MoneySense (filling in for Kyle Prevost) – Making Sense of the Markets. For MoneySense readers I reiterated my take (somewhat borrowed from my favourite economists and market analysts) that economic forces are in play, but we are moving in slow motion. Central bankers weigh killing inflation vs hurting the economy. That post also looks at the strong start to the earnings season, thanks to the big U.S. banks. Also, Apple continues moving into new product lines, developing additional revenue streams, plus moving into the most populated nation on earth – India. This Sunday, wer’e making sense of it all.
Here’s Making Sense of the Markets for the week ending April 23.
And moving in slow motion on Cut The Crap Investing.
From the MoneySense post …
If we don’t get some form of recession, it will be an outlier. That said, the expert and economist consensus appears to be that we will experience a soft recession. And that recession might arrive in the second half of 2023, or early 2024.
We will follow the U.S. into recession if they go first. Canada always does.
And as I often remind readers of this blog.
There is much uncertainty, thanks to the unpredictability of inflation. Retirees should be prepared for anything and everything. Those in the accumulation stage might ignore all of my interesting economic observations and continue to invest on a regular schedule.
Elon Musk – not an economist
There was a fascinating article on Seeking Alpha – Musk Sees Parallels With The 1929 Crash And The Great Depression.
That article is paywall (though you may get one of three free reads), give it a click. That said, I will give you a few details from that post. Musk is ‘concerned’ that the Fed is hiking rates into a recession. That usually leads to bad things – such as the Depression of the 1930’s.
That’s a bit of a stretch fear case scenario as the author points out, though there are some parallels. We live in bailout nations these days, where central bankers and finance ministers do everything they can to avoid severe crisis. Look to the fiscal and monetary response to the pandemic when government forces promised to do anything to support the economy, and citizens. In the Great Depression government agencies did most everything wrong, and offered very little support.
Today’s Fed event of hiking into a recession is more akin to the 1970’s stagflation fight. They have to hike rates into economic weakness (or a recession) because the inflation fight is more important that concerns over economic weakness. Deflation took hold in the Great Depression.
You can see the rate hikes (blue line) into the recessions (grey bars) in 1974 and 1980.
That chart provides wonderful framing of the challenge for central bankers today. How much hurt do they want to put on the economy? How much do they really fear inflation?
In Canada, we should stay the course on behalf of homeowner wannabes. Housing ‘unaffordability’ is still off the charts.
That 70’s show is worth a look
Certainly inflation is currently not as roaring as it was in that 70’s show. So perhaps the fight will not need to be as damaging. But keep in mind that stocks delivered no real return for about a decade or more if you start in the last 60’s and early 70’s. Stock markets don’t like robust inflation. Bonds also don’t like inflation and the rising rate environment.
I use some dedicated inflation fighters in my all-weather portfolio.
This is the current situation in the U.S., this chart is also from that Seeking Alpha article.
Experts say that the Fed rate needs to move above the inflation rate to slay that inflation dragon. The consensus is that the Fed will raise the rate by 0.25% at their next meeting in early May. They will then go on a rate hike hiatus, following the steps of the Bank of Canada.
And back to Elon Musk, he is begging for rate cuts now, because a recession will pull the plug on his Tesla stock. Nice try Elon 😉
The Sunday Reads
At My Own Advisor Marks looks at the benefit or cost of paying off your mortgage, early. Of course, it feels good to be debt free and remove the risk of rising rates and increased borrowing costs. Too many were too complacent, guessing that we would be in a low inflation and low rate environment – forever.
We always check in with Dividend Hawk – and that will be a great resource as earnings season kicks into high gear.
A financial treasure trove, the reads and podcasts of the week from Banker on Wheels. And build upon that collection thanks to these are the goods at The Irrelevant Investor.
Portfolio updates
At Tawcan, Bob offers his March portfolio update. You’ll also see some great pics of their family ski trip to Whistler.
Compared to March 2022, we saw a YoY increase of 10.69%.
At Passive Canadian Income, Rob looks at his 36% year over year dividend growth for March.
Well done Rob. While I like my dividends, readers will know that I favour a total return approach. The Canadian Wide Moat portfolio that includes the railway and grocers, in addition to financials, utilities, telcos and pipelines might be the “best” stock model in Canada for risk-adjusted returns.
All said, the dividends that Canadian self-directed investors love help immensely with behaviour. They can’t wait to collect and reinvest. Here, I looked at Canadian dividend investors leading the charge in uncertain times.
And Dividend Daddy says that next week will be a monster week for his dividend haul. April is very good for the Wide Moat Portfolio holdings. I will be harvesting some of those dividends for a May vactation. Yes, it’s nice to have a portfolio where you don’t have to sell shares, even though selling shares over time is usually(eventually) part of a sensible financial plan.
Once again, check in with Mark and Joe at Cashflows & Portfolios for a more optimal retirement funding strategy and plan.
On Findependence Hub Steve Lowrie offers some timeless financial tips. That’s a good post with a focus on tax efficiency. Self-directed investors can certainly do the research to create a very sensible investment strategy and financial plan. When you need help, you might check in with an advice-only financial planner. You can get advice without having an advisor in your pocket every day.
Dr. Graham offers that a joyful retirement is a grateful one.
Save a rich celebrity
And yes, I gave in and purchased a blue checkmark. I want to ensure that I can reach as many investors as possible. It is worth the small investment. Twitter can be a wonderful resource, perhaps the best. You can follow me here.
Recent must reads
The superiority of Canadian Robo Advisors over mutual funds.
Using defensive sector ETFs for retirement.
Core ETF portfolio performance update.
The first home savings account.
Cutting fees and the crap investing …
Earn a break on fees by way of many of these partnership links.
CANADA’S TOP-RANKED DISCOUNT BROKERAGE
Cut the Crap Investing readers can earn a break on fees at Questrade by way of that partnership link. At Questrade, you can buy ETFs for free.
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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.
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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 2.5% and 3.5%. You’ll find some higher rates on GICs, recently updated and increased to 3-5%. They also offer U.S. dollar accounts. We use EQ Bank, they have been awesome.
OUR CASHBACK CREDIT CARD
We make between $40 to $70 every month! And that’s on everyday spending. There are no fees with …
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Last month we received $45 in cash. Spending is down, yes! Less on gas, less on restaurants, less on groceries – our 2% cashback categories.
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I closed my Twitter account. Musk is a creep.
Your link to “Joyful and Grateful” was enriching for me. Thank You 🙂