The history of stock market momentum signalled that November would be a strong month, and history more than rhymed. November delivered almost 9% for U.S. stocks and Canadian stocks had a strong month up over 6%. International stocks were up by near 6% as well. Bonds are back as well. With inflation cooperating and predictions of eventual rate cuts, we’re set up for an everything market. The traditional balanced portfolio is bouncing back in style. Gold and digital gold (bitcoin) are also having their way these days. It’s a November to remember for stocks, this week on the Sunday Reads.
The U.S. stock market is setting records, the good kind we might say …
2023 asset scorecard …
Total Returns through November… Bitcoin $BTC: +126% Nasdaq 100 $QQQ: +47% S&P 500 $SPY: +21% Developed ex-US $VEA: +12% Gold $GLD: +11% Emerging Markets $VWO: +6% Cash $BIL: +4.5% Small Caps $IWM: +4% REITs $VNQ: +2% US Bonds $AGG: +2% Crude Oil $USO: +0%
The S&P 500 on Friday advanced 0.77% for the week to close at 4,594.63 points, posting gains in three out of five sessions. This follows up what was one of the best Novembers on record. The good news is that we now have market breadth. That is, the returns are not concentrated in the magnificent 7 growth stocks.
Most sectors are now contributing.
And more stats on the potential of continued momentum …
Here was an interesting tidbit on earnings for U.S. stocks.
Analysts are predicting (year-over-year) corporate earnings growth of 6.7% for the first quarter of 2024 and growth of 10.5% for the second quarter of next year, found FactSet.
All eleven sectors are projected to report year-over-year earnings growth by the second quarter next year, according to the data analytics company.
The S&P 500 has gained about 18.5% so far this year after falling nearly 20% in 2022.
Of course past performance and trends don’t guarantee future returns. And we should not time the market. We need to stay invested and stick to our investment like Guerilla Glue. But I certainly find market history of great interest, and I don’t mind being the bearer of well, non-bearish news – also known as good news.
Over the last 5-years a balanced growth couch potato portfolio model has delivered over 45%.
Thank you Charlie. RIP
This week we lost an investor legend who was just a few months away from his 100th birthday. Charlie Munger was the right hand man for Warren Buffett and Berkshire Hathaway. This would be my favourite quote from Charlie.
“The big money is not in the buying or selling, but in the waiting.”
Charlie Munger
Of course that aligns with this post from October when it comes to generating long term wealth …
The waiting is the hardest part.
On that Canadian home bias …
Canada has slipped recently, while the U.S. continues to separate from Canada and the rest of the world. As I often write, many or most of the best companies on the planet are in the U.S.
A threat to Canadian oil price and Canadian oil stocks, and oil in general?
And gasoline demand is weak in the U.S.
That said, energy is still where they keep the free cash flow …
The cashflow is even more generous for Canadian oil and gas stocks, and I’m more than happy to stick with that sector. As always we should pay attention to our portfolio weighting so that we do not expose ourselves to unnecessary risk for economically sensitve sectors.
That said I have no problem overweighting to defensive sectors for retirement.
Canadian bank week
The Canadian banks reported this past week. It was a challenging quarter as expected. Kyle offered an earnings summary as he made sense of the week for MoneySense.
The following is from Kyle.
Here’s how the banks have done over the last three months:
- RBC (RY/TSX): Earnings per share of $2.78 (versus $2.62 predicted) and a revenue beat at $13.03 billion (versus $13.21 billion predicted).
- TD (TD/TSX): Earnings per share of $1.83 (versus $1.84 predicted) and revenue of $13.18 billion (versus $12.36 billion predicted).
- Bank of Montreal (BMO/TSX): Earnings per share of $2.81 (versus $2.85 predicted) and revenues of $8.25 billion (versus $8.36 billion predicted).
- Bank of Nova Scotia (BNS/TSX): Earnings per share of $1.26 (versus $1.65 predicted) and revenues of $7.97 billion (versus $8.18 billion predicted). Shares dropped more than 4% on Tuesday.
- Canadian Imperial Bank of Commerce (CIBC/TSX): Earnings per share of $1.57 (versus $1.53 predicted) and revenues of $5.84 billion (versus $5.93 billion predicted).
- National Bank of Canada (NA/TSX): Earnings per share of $1.80 (versus $1.71 predicted) and revenues of $2.76 billion (versus $2.65 billion predicted).
The banks set aside generous loan loss provisions, and that of course reduces the earnings tallies. Costs were also rising. That said, banks have begun to reduce staff and seek other cost savings.
To no surprise, RBC was best of the bunch. From Kyle …
For several years, RBC has consistently had a higher price-to-earnings ratio than other Canadian banks. This is often chalked up to the premise that RBC is the strongest brand of the bunch, and the most diversified. It has also grown its revenues at a pace that justifies the higher valuation.
I hold RBC, TD and Scotiabank. I have continued to add to Vanguard’s High Dividend (VDY) in my wife’s account and in my TFSA. That ETF is dominated by financials. The Canadian banks are cheap (for good reasons) by historical standards. I think they will continue to be wonderful long term investments, but once again we should pay attention to our weightings and any Canadian home bias.
More Sunday Reads
Here’s the week in review from Dividend Hawk. You’ll find the stories of the week such as:
Enbridge Inc. (ENB) Announces 2024 Financial Guidance; ENB guided for its base business to generate EBITDA of C$16.6B-C$17.2B in FY 2024, reflecting more than 4% growth relative to the midpoint of its C$15.9B-C$16.5B guidance range for 2023, with distributable cash flow of C$5.40-C$5.80/share, excluding EBITDA and DCF contributions from the gas utilities acquisitions announced in September, which are expected to close during 2024.
In the weekly wrap from Banker on Wheels you can learn how modern indices are contructed and more reflecting on the life of Charlie Munger.
Here’s the December update from Our Financial Life. Does yield on cost really matter?
At Findependence Hub Jonathan Chevreau reports that most Canadians are not prepared for retirement and they are running out of time.
To those folks I say – send me a note. Follow this blog.
And for the third time (as warned) I’ve update the EQ Bank post with more GIC rate hikes.
And here’s some timely humour …
Help yourself – cut the crap investing
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BMO, TD, RY and ENB raised their dividends this week which adds $1700 to my growing income portfolio. Shrugging at all the financial news negativity is something I’ve done for 71 years to my benefit. Thank you Charlie Munger . Waiting is the hard part but it works.