It appears that employers and consumers did not get the recession memo. Employment is strong, and the Canadian consumer is spending at record levels. We have the same economic events playing out south of the border. The recession can wait. Perhaps we can revisit the recession talk and watch in the Fall or Winter. It’s more than likely that we will have a Summer of revenge spending – on experiences such as travel, entertainment and dining out.
Here’s a chart that I tweeted, it likely had the most clicks of anything I’ve tweeted in the past few months.
But also, pay attention to the chart I attached in that thread. Canadians are more indebted than ever. Many are and will pick up the credit card to swipe and tap their way to Spring and Summer pleasure. We see the same credit card frenzy in the U.S. And certainly, not all Canadians are in the position to spend or borrow their way to Summer fun. Let’s acknowledge that inflation is hard on many families and individuals. Food banks are experiencing record demand, even from middle class families.
Canada’s GDP growth also surprised to the upside.
The Canadian economy grew at an annualized rate of 3.1 per cent in the first quarter of 2023, Statistics Canada reported Wednesday.
Stock markets are also giving up on the recession
The S&P 500 (SP500) on Friday added 1.82% for the holiday-shortened week to close at 4,282.37 points, posting gains in two out of four sessions. The benchmark index’s advance was its third-straight week in the green, the first time it has posted such a streak since March.
For the U.S. market, here’s the sector performance in 2023. Growth leads the way.
Enjoy your Summer!
This will likely be a Summer filled with revenge spending on experiences – travel, entertainment and dining out. The recession can wait. And of course, a recession is not a given, though it is still the consensus call for late 2023 or 2024.
I am guilty of putting the risks on the table and perhaps focusing on the “negative”. I simply find the risks more exciting or interesting. And I do that in the hope that investors are aware of the risks and prepared for the risks.
Enjoy your Summer and put or keep that investment plan on auto pilot. The markets keep reminding us that any market timing is more than difficult. As per mentions later in this post, there is tons of great value to be found in Canada (and International). We can find pockets of value in the U.S. market as well. Bonds and cash are paying well. There’s no reason to be on the sidelines.
If you’ve held back cash (suffering from analysis paralysis), consider dollar cost averaging. Invest monies on a regular schedule.
I’m happy to add to our stocks and ETFs. The dividends continue to grow and flow. I will harvest some of those divvies for Summer fun.
And for all of the noise and risks, keep in mind that a simple balanced ETF portfolio is up nicely over the last year, 3 years, 5 years and beyond.
More Sunday Reads
At My Own Advisor, Mark looks at the costs that can disappear in retirement. That can include a mortgage, the need to save for retirement, the kids’ costs, and your tax rate can be greatly decreased. You may no longer need expensive insurance, you might downsize the home, become a one-car family and more.
That topic was inspired by Twitter friend and financial planner Mark McGrath.
Kyle Prevost made sense of the week at MoneySense – we’re raising the roof on the U.S. debt ceiling. Kyle also covered the recent GDP story –
On Wednesday, StatCan reported that Canada’s gross domestic product (GDP) had risen at an annualized rate of 3.1% for the first quarter of the year. This blew away analyst expectations of 2.3% to 2.5%, and was much higher than the 0.1% decrease we saw during the final quarter of 2022.
You’ll also find some earnings highlights for U.S. and Canadian companies.
We always check in with the Dividend Hawk for the week in review. In addition to the headlines and earnings, you’ll see Hawk’s dividends received and portfolio moves.
Banker on Wheels starts with 10 bad takes on this market.
At Tawcan, a reader asked Bob Lau – what to do with a $5 million windfall. From investing to making ongoing charitable donations, the options are many. In that post, Bob also offers his favourite top 20 Canadian stocks. I’d have to agree with the portfolio construction. It is very similar to the Wider Moat Canadian stock portfolio.
If we came into $5 million, helping others would certainly be at the top of the list. Obtaining financial advice would certainly be a must.
It’s always interesting to see what other self-directed investor are up to. Have a look at the portfolio for the Newcomer Investor.
That’s a good mix, but Newcomer might pay attention to that Canadian home bias.
Artificial intelligence, working for a better retirement
At the Retirement Manifesto, Fritz looks at the impact of AI on retirement.
Regardless of what you think about AI, it’s a fascinating topic. Blending intrigue and concern, it’s a topic that will dominate the headlines for years to come and it’s something to pay attention to. I suspect the impact AI has on our world will be bigger than anything we’ve experienced in our lifetimes.
In retirement, AI might help take care of our every need. This is a fascinating development to watch.
Many types of REITs have faced a lot of pressure, as work from home and shop from home has changed the real estate landscape. I am still a big fan of REITs for the balanced portfolio. At Stocktrades.ca, Dan looks at some top picks in the Canadian REIT space.
It’s a strong week on Findependence Hub, with a fresh post Monday to Friday. You might start with ETF fees and what you need to know. That’s a good post that goes beyond the fee story.
In the Globe & Mail (paywall) the suggestion that we might not hang up on telcom stocks.
The flurry of uncertainty facing the telecom sector is already weighing on share prices, and lifting yields to levels that are hard to ignore: 5.7 per cent for Telus and 6.3 per cent for BCE, which is historically a bullish level for the stock.
And as we discussed in last week’s post, the Canadian banks are also in very good value territory.
There’s also very reasonable vauations in beat up oil and gas stocks. An ETF that provides good exposure to the telcos, financials and energy is iShares XEI.
Here’s iShares XEI vs Vanguard VDY.
To gain access to the utilities (with some modest leverage) there’s Hamilton’s HUTS within the defensive space. That ETF includes the telcos, pipelines and traditional utilities.
Building the U.S. dividend growth portfolio
I was asked (on many fronts) what I would do if I was building the U.S. stock portfolio today. I’d start with these stocks. Check out the thread and you’ll find some other very good suggestions. A post is in the works for Seeking Alpha, and on this blog.
Can I get that list down to 20 stocks?
While we hold 20 U.S. stocks with a wonderful portfolio track record, I may consider a few other names, in the name of defense.
Lastly, for May we received $70 from our Tangerine Cashback Credit Card. We were travelling and spending.
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OUR CASHBACK CREDIT CARD
We make between $40 to $70 every month! And that’s on everyday spending. There are no fees with …
Last month we received $70 in cash. We were travelling and spening.
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