We’re in one of those weird (but good) stages when just about everything is working. Across the board stocks are delivering. Bonds are back, meaning the balanced portfolio is back, and at all-time highs. Gold is also setting new highs. In fact it’s all kind of ‘goldilocksy’ these days. Inflation is behaving as we prepare for rate cuts in the U.S., and additional cuts in Canada. We’re looking at Canadian banks, pipelines, gold, retirement and more on the Sunday Reads.
With a bad-news-first theme, TD kicked things off this past week, the rest of the Canadian banks are set to report next week. Scotiabank and BMO report Aug. 27, RBC and National Bank on Aug. 28, and CIBC wraps earnings on Aug. 29. As the economy goes, so goes the banks. This report from RBC suggests that Canadian GDP data due out next week will show contined weakness. And certainly banks present their own unique risks due to loans and defaults. More on the banks later in this post.
Big dividend space gets some help
Rate cuts, and less attractive savings and GIC rates are driving the big dividend space says a report from CIBC. According to that post from Rob Carrick, $220 billion was diverted away from these stocks when rates were increased. That money is now finding its way back to the big dividends.
CIBC’s report singled out four traditional stock market sectors favoured for their yield – real estate, utilities, telecom and financials. “Simply put, there is as much as 15 per cent of the current market cap of these sectors that might return if rates continue falling,” the report says.
Canadian banks earnings season
TD Bank reported earnings last week, and we’ll see the rest of ’em next week. The Canadian bank sector is starting to move after going nowhere for two years.
Once again we have to be patient with our stocks. We springload waiting for the next move up. This is nice to see for Canadian investors.
And the pipeline stocks pitch in …
In August of 2023 I asked – should you sell TC Energy and your pipelines stocks?
Of course the suggestion was to hold and add.
Rate cuts going south
South of the border Powell says rate cuts are coming.
The time has come for cuts,” Powell said at the Jackson Hole Economic Symposium, increasingly confident that inflation will return to the central bank’s 2% target.
Inflation has slowed and the job market is not as overheated as previous in the U.S. Stocks gave the big thumbs up of course.
Beyond the 4% rule
And from Karsten a very good podcast that looks beyond the 4% rule and safe withdrawal strategies.
A must read is this post that looks at creating retirement income from your portfolio. A data-rich chart looks at 4%, 5% and 6% spend rates.
Oil and gas stock performance
I’m happy to keep adding to our CNQ, IMO, SU and TOU. The big 4. That’s where they keep the free cash flow, but we certainly appear to be investing in the ability of OPEC and the Saudis to control (keep higher) oil prices.
The cost of low risk tolerance
My Tweet sums up my thoughts. For Canadians, and back in early 2019, I posted that the Canadian Robo Advisors are a good training ground for investors.
Check out Justwealth, Canada’s top robo advisor.
If you’re comfortable pressing that buy button, you can also use an all-in-one asset allocation ETF. But they are so good, you may never leave.
I promise to update the returns this week, for the AA portfolios. And things have certainly improved. For example, iShares XGRO is up 58% over the last 5 years while the all-equity XEQT is up 74%. You can do some serious wealth creation with those levels of total returns.
More Sunday Reads
Dividend Hawk takes a look at TD earnings and more.
The Toronto-Dominion Bank (TD) announced it has taken a further provision of US$2.6B in its fiscal Q3 results in anticipation of reaching a global resolution of civil and criminal investigations into its U.S. Bank Secrecy Act/anti-money laundering program by U.S. Authorities. TD also announced that it has sold 40,500,000 shares of common stock of The Charles Schwab Corporation. The share sale will reduce TD’s ownership interest in Schwab from 12.3% to 10.1%.
The stock was hit hard after earnings, but made a recovery attempt during the rest of the week. Revenue growth was solid. Here’s me focusing on the positive, ha …
But there is the chance that regulators will put the handcuffs on any further TD U.S. expansion plans. That is a story to watch.
At Findependence Hub (linking to his MoneySense article) Jonathan Chevreau looks at reverse mortgages for retirees. Of course using your home equity as an ATM for retirement creates risks, especially when borrowing costs are high. That said, used in very modest fashion a HELOC can provide a nice little top up of tax-free income. It can be available to fill in the income gap when stock markets take a big hit in a recession.
Building the portfolio
Banker on Wheels takes a look at building the balanced portfolio and early retirement vs life expectancy. The outperformance of the U.S. market from 2010 is nothing short of incredible.
But this post reminds us of the value of diversification vs performance chasing. That is a very good post that frames risk and returns. That said, the post does point out the stuctural shift with the U.S. market leading the way on growth. But in the end, basic diversification will likely do the trick. I like U.S. / Canada / other international, in that order. That is a personal bias. And I do pay attention to valuation in the U.S. market.
And what another great year for U.S. stocks. They fooled everyone in 2024.
And ERN Early Retirement Now is back with a new post. Will early retirement reduce life expectancy?
Back on the Canadian banks, Dan at stocktrades takes a look at RBC the beast of Canadian banking, and my second largest stock holding after Apple.
For MoneySense, Kyle delivers a very good Making Sense of the Markets post looking at the CN strike, inflation in Canada, Target and TD.
And yes, and yet, gold continues to shine …
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