The Bank of Canada made another big 50 bps (0.50%) rate cut this past Wednesday. Our economy is weak (to be kind), and massive numbers of mortgage holders will face a rate reset in 2025 and 2026. We can’t afford any additional weakness that rate cuts are designed to create. Inflation is well under control in Canada thank you very much. Can Canada pull off the proverbial soft landing, or will we skid on the ice, and off the runway? Who knows. All said, lower rates will offer relief on many fronts. It also may continue to be a boost for rate-sensitive stocks (utilities, telcos, pipelines) and bonds. Canadian stocks are making the cut as well, looking to end the year up over 20%.
It looks like the rate cut path is ahead of schedule.
The rate cut path and bonds ‘spike’, from last August. You’ll find the previous bank projections in that post.
Your cash takes a hit …
I have updated the ‘cash page’ on Cut The Crap Investing.
Putting your cash to work in Canada.
And I’ve added a few options for grabbing some higher rates in the U.S. You’ll find links to the top savings rates, GIC rates and a list of cash ETFs in Canada. Of course you can always use ultra-short bonds with CBIL for Canadian Dollars and UBIL.U for U.S. Dollar accounts.
As I suggested over a year ago in The Bank of Canada says I’ll hold, you could have easiliy hedged the lower rate environment with bonds. When rates go down, bonds go up. You can still hedge the current rates with those bonds. Considering the inflation rate, the cash and GIC rates of the day are still attractive.
The Loonie takes a dive …
We’ve lost about another 8 cents over the last 3 months. But the beautiful part of owning a well-balanced portfolio is that your U.S. Dollar assets have received a 6% boost, in Canadian Dollar terms. If you have a 30% gain on your U.S. stocks, add 6% to get to 36%.
But more importantly, if you’re travelling Stateside you don’t have to pay $1.42 CAD plus conversion charges to get an almightly American Dollar. You own U.S. Dollars.
Related post from 2019: Like to head south in the Winter? Don’t let the Canadian dollar stop you at the border.
Cut The Crap Investing readers are packin’ Benjamins.
How to use the TFSA
Shifting gears, this bears repeating …
Related post: How to use your TFSA account.
But as wonder as is the TFSA the tax-lowering account is almost always better …
The Loonie Doctor asks …
Asset returns from 2011
Asset total returns from 2011 courtesy of Charlie Bilello …
Where would Canadian stocks fit in, on this chart? We’d be high up on the list with a cumulative return of 200%. We’re double the cumulative return of International Stocks.
What an incredible period for creating wealth. And the recent momentum over the last 14 months for Canadian stocks is quite remarkable. From the launch of this blog in 2018 I have been ‘right’ about major asset classes and performance. While I have to admit it is a bias, I have suggested America first (MAGA pun intended), then Canada and then International. The call on Gold an Bitcoin has also been more than useful for readers.
The stock market is not the economy
At Moneysense Kyle addressed the investment world’s hunger for U.S. stocks and U.S. exceptionalism. And here’s an interesting chart on GDP weight vs global stock market weight. It’s true, the economy is not the stock market in each country or region.
Kyle quipped …
We agree with former U.S. Treasury Secretary Lawrence Summers when he said, “Europe is a museum, Japan is a nursing home, China is a jail, and bitcoin is an experiment.” To continue the analogy, we could add for laughs that Canada is a skating rink—in the age of global warming.
Canada stocks (companies) are benefitting from the relationship with U.S. and other foreign markets. Canadian stocks are becoming much less reliant on the Canadian economy and the Canadian consumer. I’ve seen estimates that suggest almost 50% of revenues and profits of our largest companies are generated outside of our own borders. That’s why our stock market can rock while our economy is essentially in recession mode. Also, the stock markets are forward thinking. Market makers see better days ahead for Canada. Let’s hope they are right.
Inflation is under control. We have aggressive rate cuts. A new business-friendly government will likely be in power in less than a year’s time.
The Canadian staples
The Canadian grocers operate in an oligopoly. There might be no better defensive position when we enter a recesssion. Cause you still gotta eat. I’ve long sugested that Canadian investors can bag all of the above companies and more by the way of iShares XST.TO consumer staples ETF. Couche-Tard and additional staples are in the mix. That ETF is a wonderful top up for retirees and near retirees.
At Stocktrades.ca and on the retail front, Dylan asks – Has Dollorama run too far?
I also own Walmart that has grabbed 8% of the Canadian grocery budget. And more than that, Walmart is known as a recession-resistant stock.
Walmart is shockingly my top performing stock over the last year with an 83.5% return. Here’s our top ten, only two Canadian stocks make the list, RBC and Imperial Oil …
More Sunday Reads
At Banker on Wheels Sunday bests this caught my eye – Microstrategy’s secret sauce is volatility not bitcoin. Yes, if you thought that bitcoin was volatile, watch out. That is a weird one. Folks lend Microstrategy money (with 0% interest) so that Michael Saylor can then go buy bitcoin to put on his company ledger. Those bond investors can then convert their bonds to shares, should the stock price go ballistic due a a rising bitcoin price and ‘enthusiasm’. Saylor also creates shares to buy more bitcoin, diluting current ownership in a money-losing operation. Microstrategy investors go along for the ride, with most probably not knowing what they are investing in. I’d guess this does not end well. 😉
But did I mention that many are making millions to hundreds of millions of dollars from this micro strategy? Ha.
Dividend Hawk’s the week in review shows that we shared in the Johnson & Johnson and Raytheon dividends. Pembina Pipelines offered guidance …
Pembina Pipeline Corporation (TSE:PPL) Announces 2025 Guidance and Provides Business Update; PPL guides 2025 adjusted EBITDA of $4.2 billion to $4.5 billion, capital investment program of $1.1 billion and expects to generate positive free cash flow and maintain a year-end debt-to-adjusted EBITDA ratio of 3.4 to 3.7 times.
We’re happy to hold Pembina in my wife’s RRSP along with TC Energy and Enbridge.
The dogs of the TSX
Hawk also linked to my Seeking Alpha post – Value north of the border with Canada’s dogs of the TSX.
I just love the image I was able to grab from Seeking Alpha, ha.
The Dogs of the TSX (Beat The TSX Portfolio) are likely to underperform again in 2024.
Here’s the Beat The TSX update on Cut The Crap Investing.
At Findependencehub Franklin Templeton’s 10-year outlook suggests that stocks will beat bonds, with International markets beating North American markets.
You can place your bets, or bet on all of them at the same time with an asset allocation ETF. With an asset allocation ETF you own the stock markets of the world by entering one ticker symbol. Just brilliant. You will often own various bond markets as well to manage the risk of stocks.
At The Retirement Manifesto Fritz offers 10 steps on how to prepare your finances for retirement. The post is offered from a U.S. perspective but the lessons and tips are universal. We do need to prepare well in advance of the retirement start date. We need to adopt a greater financial plan.
At Tawcan Bob offers his 5 highest conviction picks. While we’d never just own 5 stocks, these exercises are interesting, and fun. And all said, it might suggest where one might be comfortable with overweight positions. That’s a very solid list.
If I could only own 5 stocks it would be Berkshire Hathaway (ya that’s cheating because it’s a conglomerate, ha), plus BlackRock, Apple, Walmart and Pepsi. And we do own all 5.
As a bonus pick, Royal Bank of Canada.
At GenYMoney we have 2024 finance resolutions and year end recap.
Join Cut The Crap Investing
You can follow this blog, it’s free. Newsletters, plus other free content and ‘ideas’ will be delivered to your email inbox. Enter your email in the subscribe area, or ‘join us today’ on the home page. And check out Retirement Club too.
ETFs / Stock Portfolios / Retirement Strategies / Wealth Creation
Join Retirement Club
Retirement Club will start in mid January. It is a series of monthly Zoom calls, monthly newsletters, retirement portfolio updates, a resource hub and more. Use the Contact Form to send me an email and I will forward the Retirement Club outline.
Thanks Partners
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. It’s a great place to build your stock portfolio.
Here’s Canada’s top-performing Robo Advisor, Justwealth. You can get advice, planning and low-fee ETF portfolios all at one shop.
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.
OUR SAVINGS ACCOUNTS
Make your cash work a lot harder at EQ Bank. RRSP and TFSA account savings rates are at 2.5% and 3.0%. You’ll find some higher rates on GICs up to 4.00%. 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 …
The Tangerine Cash Back Credit Card
For November we received $51.44 in cash. You can select 3 categories for 2% cash back.
That cash went into my TFSA account to buy some bitcoin, ha.
While I do not accept monies for feature blog posts please click here on the mission and ‘how I might get paid’ disclosures. Affiliate partnerships help me (try to) pay the bills for this site. But they don’t, ha. That will allow me to keep this site free of ads and easy to read.
Hi Dale your investment club sounds like a great idea.Please send me the info
Thanks Garth, that Retirement Club outline is on its way.
Hi Dale,
We made a conscious decision to escape the Magnificent Seven by investing in XDG a couple of years ago for our TFSA’s. The information sector is less than 6% in this ETF with the largest sector consumer staples accounting for 18.3% of the portfolio. The U.S. makes up 58.6% of the fund with the rest spread out around the globe.
Thanks DividendsOn, I am a fan of the iShares Quality Dividend ETFs as you know. You’ve found yourself a solid global portfolio with very good valuation given the times. Very suitable for a retiree or near retiree and those looking to manage volatility.
I would suggest though that younger investors go for growth within their risk tolerance level.
“More money is more better”.
Dale