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Tag: investing strategy

  • Making sense of the markets this week: September 1, 2024 – MoneySense

    Making sense of the markets this week: September 1, 2024 – MoneySense

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    Couche-Tard takes aim at Slurpee King

    Because I grew up in near Winnipeg, the Slurpee Capital of the World, I thought I knew everything the 7-Eleven universe had to offer. Then, I visited Japan and Thailand last year. I realized that I hadn’t seen anything yet. (All figures in U.S. dollars in this section.)

    In much of Thailand and Japan (among other places in Asia), the convenience store is a daily touchstone stop. In Tokyo, there are more than 3,000 7-Eleven stores, a large part of the country’s 56,000-plus convenience store locations. While 7-Eleven was a big part of my childhood, it pales in comparison to the role it plays within many Asian communities. 

    So, it quickly caught my attention when Canadian corporate darling Alimentation Couche-Tard (ATD/TSX) announced it was making a friendly takeover bid for Tokyo-based Seven & I Holdings Co (SVNDY/NIKKEI). The possible deal is historic for many reasons.

    1. The acquisition of Seven & I Holdings Co is the largest-ever Japanese target of a foreign buyer. 
    2. It’s the first test of new 2023 takeover rules by Japan’s Ministry of Economy, Trade and Industry (METI), designed to make foreign acquisitions more welcoming and Japanese companies more internationally competitive. 
    3. It would likely top Enbridge’s $28 billion acquisition of Spectra Energy Corp back in 2016, to become Canada’s largest-ever corporate takeover.
    4. It would combine Couche-Tarde’s convenience store empire of 16,700 stores in 31 countries, with 7-Eleven’s 85,800 stores in 19 countries.
    5. By combining ATD’s and 7-Eleven’s U.S. market share, Couche-Tard would control more than 12% of the U.S. convenience store market, with the closest competitor being Casey’s General Stores at only 1.7%.
    6. It’s a massive bite to take for ATD, currently valued at about $56 billion, since 7-Eleven is currently worth about $38 billion.
    7. The potential acquisition is so large that many analysts believe ATD would have to raise $18 billion in new equity to complete the deal. That would be the biggest stock offering in Canada by a wide margin. It would also be in addition to the $2 billion in cash on hand ATD has, and its ability to borrow about $20 billion. There’s speculation that Canadian pension plans would be a key source of capital in order to get a deal done.

    Neither company disclosed the precise terms of the deal, but Couche-Tard described the offer as “friendly, non-binding.” That’s a key differentiator from a “hostile takeover.” (A hostile takeover is when a company tries to purchase more than half of another company’s shares on the free market against the wishes of the targeted company’s management, thus taking over operational control.)

    This move is not totally out of the blue for ATD, as the company has taken big acquisitional swings before. The Quebec-based operator has a long history of successfully integrating new acquisitions. Its attempt three years ago to purchase French grocery chain Carrefour for $25 billion was scuttled at the last minute by the French Finance Minister citing food security issues. Similar protectionist governmental instincts could prevent this massive deal from getting done. 

    That said, Couche-Tard has been circling (Circle K-ing?) 7-Eleven for over two years now. Perhaps it believes it has what it takes to navigate the new Japanese corporate legal waters and get the deal done.

    While there will likely be some nervous customers of 7-Eleven (nobody wants to see change at their favourite corner store), Seven & I Holdings’ shareholders must be happy. Shares were up 22% upon announcement of the proposed acquisition.

    1900 vs. 2023 stock markets

    It’s always worth keeping the long run in mind when thinking about trends and market forces. When we consider just what an incredible run the U.S. stock market has achieved over the last few years, it’s important to remember that it’s unlikely to continue that outperformance forevermore.

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    Kyle Prevost

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  • Canadian banks earnings reports – MoneySense

    Canadian banks earnings reports – MoneySense

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    While results outside the credit provisions looked better than expected, it wasn’t enough to outweigh concerns about the bank’s loan book, said Scotiabank analyst Meny Grauman in a note. “After a big credit-focused miss in Q2, the market was laser focused on credit heading into Q3 reporting, and it is unfortunate that this is where the issues are once again,” he said. “The bottom line is that fears that BMO is in fact the outlier of this credit cycle will continue to weigh on the shares.”

    Rising provisions drag on Scotiabank results, but bank sees levelling of stress

    The Bank of Nova Scotia saw third-quarter profits fall compared with a year ago as it boosted its provisions for bad loans, even as the bank says it’s seeing some levelling out of the financial stress on Canadian consumers. The bank reported Tuesday it had $1.05 billion set aside for bad loans in the quarter, up from $819 million a year earlier, but increasing only slightly from the $1.01 billion last quarter. The amount of impaired loans, the kind the bank doesn’t reasonably expect full repayment on, actually fell for Canadian banking in the third quarter compared with the second, to $338 million from $399 million.

    “I continue to be impressed by how resilient the Canadian consumer has been through this period, the trade-offs that they continue to make,” said Phil Thomas, chief risk officer at Scotiabank. The trend is clearly coming through on variable-rate mortgages, he said, which have also started to benefit from the Bank of Canada starting to cut rates. Scotia is also seeing a levelling-off in its auto loans, an area it’s been signalling as stressed for about a year, said Thomas.
    “I was really encouraged this quarter to see we’re finally stable as it relates to net write offs in that portfolio,” he said. “One quarter is not a trend, but I’m encouraged by what I’m seeing this quarter. And even as I look into next quarter, I see stability in these portfolios moving forward.”

    Scotiabank has a much smaller credit card portfolio than some other Canadian banks, but its unsecured credit line trend seems to no longer be getting worse, Thomas said. “I am super encouraged by the fact that this quarter, the levels of delinquency or any stress seem to be levelling off.”

    While stabilizing, higher loan loss provisions did weigh on profits that amounted to $1.91 billion or $1.41 per diluted share for the quarter ended July 31 compared with a profit of $2.19 billion or $1.70 per diluted share a year ago. On an adjusted basis, Scotiabank says it earned $1.63 per diluted share, down from an adjusted profit of $1.72 per diluted share in the same quarter last year. Analysts on average had expected Scotiabank to earn an adjusted profit of $1.62 per share for the quarter, according to to LSEG Data & Analytics. Revenue totalled $8.36 billion, up from $8.07 billion in the same quarter last year.

    Earlier in August, Scotiabank announced it would pay about USD$2.8 billion for a 14.9% stake in the U.S. bank KeyCorp in two stages. Some analysts have worried about the bank possibly devoting lots of cash to buy even more of the bank, but chief executive Scott Thomson said Tuesday that the deal was about getting increased exposure to the U.S. at a good price. “Our investment in KeyCorp represents a low cost low-risk approach to deploying capital in the U.S. banking market at a time when valuations are favourable and as the regulatory and competitive environment evolves.”

    TD Bank Group reports profits down 22% on anti-money laundering hit.

    TD Bank Group’s second-quarter profit fell 22% from last year as it booked costs related to a high-profile failure of its U.S. anti-money laundering program. The bank had warned of the $615-million initial charge it was taking in connection with its talks with U.S. regulators, allowing analysts to adjust projections that the bank then handily beat. “It was a strong quarter for TD with all of our businesses outperforming expectations,” said chief executive Bharat Masrani on an earnings call Thursday, after reiterating the bank’s mea culpa on its anti-money laundering controls. )

    Read the full article about TD’s earning report: Why is TD’s profit down?

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    The Canadian Press

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  • Markets response to U.S. Federal Reserve – MoneySense

    Markets response to U.S. Federal Reserve – MoneySense

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    The S&P 500 rose 1.1% after Fed Chair Jerome Powell said in a highly anticipated speech that the time has come to lower its main interest rate from a two-decade high. The index pulled within 0.6% of its all-time high set last month and has clawed back virtually all of its losses from a brief but scary summertime swoon.

    The Dow Jones Industrial Average rose 462 points, or 1.1%, to close above the 41,000 level for the first time since it set its own record in July, while the Nasdaq composite jumped 1.5%.

    U.S. Fed Chair Jerome Powell’s speech on August 23

    Powell’s speech marked a sharp turnaround for the Fed after it began hiking rates two years ago as inflation spiralled to its worst levels in generations. The Fed’s goal was to make it so expensive for U.S. households and companies to borrow that it slowed the economy and stifled inflation.

    While careful to say the task is not complete, Powell used the past tense to describe many of the conditions that sent inflation soaring after the pandemic, including a job market that “is no longer overheated.” That means the Fed can pay more attention to the other of its twin jobs: to protect an economy that is slowing but has so far defied many predictions for a recession.

    “The time has come for policy to adjust,” Powell said. “The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.” But that second part of his statement held back some of the details that Wall Street wanted so much to hear.

    Bank of Canada recent cuts

    “Canadians are experiencing rate cut déjà vu today, as the Bank of Canada (BoC) slashed its trend-setting overnight lending rate by a quarter of a per cent. It’s the second rate cut in as many months from the central bank. It implemented its first on June 5, bringing an end to a prolonged, 11-month rate hold and officially putting Canada on track for lower borrowing costs.”

    Read the full article: Making sense of the Bank of Canada interest rate decision on July 24, 2024

    Impact on Treasury yields

    Treasury yields had already pulled back sharply in the bond market since April on expectations the U.S. Federal Reserve’s next move would be to cut its main interest rate for the first time since the COVID crash in 2020. The only questions were by how much the U.S. Fed would cut and how quickly it would move.

    A danger is that traders have built their expectations too high, something they’ve frequently done in the past. Traders see a high likelihood the U.S. Fed will cut its main interest rate by at least one percentage point by the end of the year, according to data from CME Group. That would require the U.S. Fed to go beyond the traditional move of a quarter of a percentage point at least once in its three meetings remaining for the year.

    If their predictions are wrong, which has also been a frequent occurrence, that could mean Treasury yields have already pulled back too much since their decline began in the spring. That in turn could pressure all kinds of investments.

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    The Associated Press

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  • Making sense of the markets this week: August 25, 2024 – MoneySense

    Making sense of the markets this week: August 25, 2024 – MoneySense

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    On Tuesday, Statistics Canada stated that the Consumer Price Index (CPI) measured inflation of 2.5% for July. That’s down from 2.7% in June, and is the lowest inflation rate recorded since 2021.

    Deceleration in headline inflation led by shelter component , 12-month % change

    CPI basket items June 2024 July 2024
    All-items Consumer Price Index 2.7% 2.5%
    Food 2.8% 2.7%
    Shelter 6.2% 5.7%
    Household operations, furnishings and equipment -0.9% -0.1%
    Clothing and footwear -3.1% -2.7%
    Transportation 2% 2%
    Health and personal care 3.0% 2.9%
    Recreation, education and reading 0.6% -0.2%
    Alcoholic beverages, tobacco products and recreational cannabis 3.1% 2.7%
    Source: Statistics Canada

    In fact, if you take shelter out of the equation, we’re getting close to zero inflation. And that’s significant for two reasons:

    1. The shelter-inflation rate (primarily a measurement of rent and mortgage expenses) did come down substantially between June and July.
    2. As the Bank of Canada (BoC) cuts interest rates, the inflation component of the CPI will inevitably go down as Canadians will have access to mortgages with lower rates.

    Notably, passenger vehicle prices were down 1.4% in July. Clothing and footwear was also down by 2.7%. Food and gas were up by 2.7% and 1.9% respectively. British Columbia and New Brunswick had the highest inflation rate growth, while Manitoba and Saksatchewan had the lowest.

    It’s pretty clear there’s no longer an overall inflation crisis in Canada. It’s now simply a home affordability issue at this point. Economists were widely predicting that this continuing trend of a downward inflation rate would clear the way for continued interest-rate cuts in the coming months. Money markets are now predicting a 0.25% cut minimum on September 4, with a 4% probability that the cut will be 0.50%. Looking further down the road, those same markets are predicting there is a 76% chance we will see a 2% decrease by October of 2025. 

    I hope you locked in those guaranteed investment certificates (GICs) or bonds when you could still snag those high rates Check out MoneySense’s list of the best GIC rates in Canada, and my article on low-risk investments over at MillionDollarJourney.com.

    A bullseye for Target

    Target Corporation posted a big earnings beat on Wednesday and shareholders saw its shares increase in value by 11.20%. The Minneapolis-based discount retailer is the seventh-largest in the U.S.

    Retail earnings highlights

    All numbers are in U.S. dollars.

    • Target (TGT/NYSE): Earnings per share of $2.57 (versus $2.18 predicted). Revenue of $25.45 billion (versus $25.21 billion estimate).
    • Lowe’s Companies (LOW/NYSE): Earnings per share of $4.10 (versus $3.97 predicted), and revenues of $23.59 billion (versus $23.91 billion predicted).

    Same-store sales for Target grew 3% last quarter, after five straight quarters of declining sales. More purchases of discretionary items like clothing were responsible for the positive reversal to the declining sales trend.

    Target’s COO Michael Fiddelke had a very cautious tone, though. “While we’ve been pleased with our performance so far this year, our view of the consumer remains largely the same. The range of possibilities and the macroeconomic backdrop in consumer data and in our business remains unusually high.” And Target CEO Brian Cornell cited price reductions and a value-seeking consumer as reasons for increased foot traffic in the quarter.

    It was very much a mediocre earnings report for Lowes, though, as it beat earnings expectations decisively but cut its full-year forecast. Shares were down by about 1% on Tuesday after the earnings announcement. 

    Lowe’s CEO Marvin Ellison said consumers were waiting for cuts in interest rates before taking on large home improvement projects. Because 90% of Lowes’ customers are homeowners (as opposed to contractors), they are particularly sensitive to movements in interest rates, he shared. Same-store sales were down 5.1% year over year.

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    Kyle Prevost

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  • Making sense of the markets this week: August 18, 2024 – MoneySense

    Making sense of the markets this week: August 18, 2024 – MoneySense

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    The U.S. is set to cut rates—finally

    After much speculation about when the U.S. will finally begin cutting its interest rates, the CME FedWatch tool reports a 100% chance that the U.S. Federal Reserve will cut its rates in September. Market watchers are pretty confident, with a 36% chance that the U.S. Fed will go right to a 0.50% cut instead of nudging the rate down. And looking ahead, the futures market predicts a 100% chance of 0.75% in rate cuts by December this year, with a 32% chance of a 1.25% rate decrease. The forecasts became stronger this week as the annualized inflation rate in the U.S. slowed to 2.9%, its lowest rate since March 2021. There are a lot of percentages here, but the gist is people are expecting big interest rate cuts.

    Those probabilities should take some of the currency pressure off of the Bank of Canada (BoC) when it makes its next interest rate decision on September 4. If the BoC were to continue to cut rates at a faster pace than the U.S. Fed, the Canadian dollar would substantially depreciate and import-led inflation would likely become an issue.

    Source: CNBC

    Here are some top-line takeaways from the U.S. Labor Department July CPI report:

    • Core CPI (excluding food and energy) rose at an annualized inflation rate of 3.2%.
    • Shelter costs rose 0.4% in one month and were responsible for 90% of the headline inflation increase.
    • Food prices were up 0.2% from June to July.
    • Energy prices were flat from June to July.
    • Medical care services and apparel actually deflated by 0.3% and -0.4% respectively.

    When combined with the meagre July jobs report, it’s pretty clear the U.S. consumer-led inflation pressures are receding. As the U.S. cuts interest rates and mortgage costs come down, it’s quite likely that shelter costs (the last leg of strong inflation) could come down as well.

    Walmart: “Not projecting a recession”

    Despite slowing U.S. consumer spending, mega retailers Home Depot and Walmart continue to book solid profits.

    U.S. retail earnings highlights

    Here are the results from this week. All numbers below are reported in USD.

    • Walmart (WMT/NYSE): Earnings per share of $0.67 (versus $0.65 predicted). Revenue of $169.34 billion (versus $168.63 billion predicted).
    • Home Depot (HD/NYSE): Earnings per share of $4.60 (versus $4.49 predicted). Revenue of $43.18 billion (versus $43.06 billion predicted).

    While Home Depot posted a strong earnings beat on Wednesday, forward guidance was lukewarm, resulting in a gain of 1.60% on the day. Walmart, on the other hand, knocked the ball out of the park and raised its forward guidance and booked a gain of 6.58% on Thursday.

    Walmart Chief Financial Officer John David Rainey told CNBC, “In this environment, it’s responsible or prudent to be a little bit guarded with the outlook, but we’re not projecting a recession.” He went on to add, “We see, among our members and customers, that they remain choiceful, discerning, value-seeking, focusing on things like essentials rather than discretionary items, but importantly, we don’t see any additional fraying of consumer health.”

    Same-store sales for Walmart U.S. were up 4.2% year over year, and e-commerce sales were up 22%. The mega retailer highlighted its launch of the Bettergoods grocery brand as a way to monetize the trend toward cheaper food-at-home options, and away from fast food. 

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    Kyle Prevost

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  • Top 25 timeless personal finance books – MoneySense

    Top 25 timeless personal finance books – MoneySense

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    6. Beating the Street by Peter Lynch (Simon and Schuster, 1993)

    “Beating the Street is one of the first investing books I ever read, and it’s stayed with me because it makes stock investing accessible to beginners. There are many highly analytical and slightly scary books on investing, but Peter Lynch managed to make stocks exciting and approachable using simple, real-world examples drawn from his own experience as a high-performing fund manager. It’s an oldie but a goodie.”
    —Aditya Nain, MoneySense contributor, author, speaker and educator about Canadian investments, personal finance and crypto

    Master the basics of personal finance—at any age

    Cover of the book Seventeen to Millionaire
    7. Seventeen to Millionaire by Douglas Price (self-published, 2022)

    “This book feels like your [parents] sat you down and taught you everything you need to know about money, before you ever encountered any of it. It gives you the opportunity to take on the world, with easily digestible knowledge in your back pocket.”
    —Reni Odetoyinbo, financial educator and content creator (Reni the Resource)

    8. I Will Teach You to Be Rich by Ramit Sethi (revised edition, Workman Publishing Company, 2019)

    “A great book for anyone who wants to understand how the financial system works. I love that this book is incredibly practical. It breaks personal finance down in such an easy-to-understand way and helps you create systems around your finances that make things less stressful.”
    —Reni Odetoyinbo

    Cover of the book How Not to Move Back In With Your Parents
    9. How Not To Move Back in With Your Parents by Rob Carrick (Doubleday Canada, 2012)

    “This book teaches the basics of money management to young adults. It helps teach good financial habits for young people and their parents!”
    —Shannon Lee Simmons, an award-winning Certified Financial Planner, speaker, bestselling author, Chartered Investment Manager, founder of the New School of Finance, the money columnist on CBC Radio’s Metro Morning and a financial expert on the concluded The Marilyn Denis Show

    Cover of the book The Wealthy Barber
    10. The Wealthy Barber: The Common Sense Guide to Successful Financial Planning by David Chilton (Stoddart, 1989)

    “This was the first personal finance book I ever read, after learning personal finance at my father’s knee. Thanks to his coaching, I have filed my own income tax returns every year since I was 16. And it still stands up. The literary conceit of the titular barber allows author David Chilton to walk through scary-sounding money concepts in a relatable way. There’s a reason it’s sold millions of copies.”
    —Sandra E. Martin, two-time MoneySense editor (OG editor-in-chief Ian McGugan hired her in 1999, and she returned in 2019 as editor-in-chief), and currently The Globe and Mail’s standards editor.

    Cover of the book The Only Investment Guide You'll Ever Need
    11.The Only Investment Guide You’ll Ever Need by Andrew Tobias (revised edition, Harper Business, 2022)

    “Let me give a shout-out to the book that changed my life: The Only Investment Guide You’ll Ever Need by Andrew Tobias. Until I plucked this book at random out of a box of discards while working a night shift in 1979, I was a university student who thought money was boring and inexplicable. Tobias changed all that. He was smart, funny and human. He made money fascinating. He also delivered a truckload of practical wisdom. I remain a fan of this personal-finance classic—now updated many times, not just for its sage advice but also for its big personality.”
    —Ian McGugan, founding editor of MoneySense, and columnist for The Globe and Mail.

    12. Stop Over-Thinking Your Money!: The Five Simple Rules of Financial Success by Preet Banerjee (Penguin Canada, 2014)

    “If you’re looking for no-nonsense, clearly explained money tips, pick up this easy-to-read volume by Canadian writer and podcaster Preet Banerjee. He boils personal finance down to five rules: disaster-proof your life, spend less than you earn, aggressively pay down high-interest debt, read the fine print, and delay consumption. Do these five things and you’ll be in better financial shape than you are today.”
    —Jaclyn Law, MoneySense’s managing editor

    Find the courage to chase your dreams

    Cover of Barbara Sher's book I Could Do Anything If I Only Knew What It Was
    13. I Could Do Anything If Only I Knew What It Was by Barbara Sher (Dell, 1995)

    “I did all the ‘right’ things in my career. I went to business school and got a great corporate job. If I had just stayed on that path, money would have taken care of itself. Except I didn’t love the job. I was stuck. I needed something to crack my paradigm about what ‘right’ meant for me. This book did that. One transformational exercise was answering this question: ‘If you could do anything and knew you would be successful, what would it be?’ This was a light-bulb moment for me. My answer was to work in TV news, and I realized that it was just fear that was holding me back. As terrified as I was, I quit my job and pursued what I really wanted. I made less money than I would have in the business world, but the big switch was worth every penny.” 
    —Bruce Sellery, CEO of Credit Canada, host of Moolala on SiriusXM, the Money Columnist for CBC Radio

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    Stephanie Griffiths

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  • “Help! My RRSPs are all over the place” – MoneySense

    “Help! My RRSPs are all over the place” – MoneySense

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    On the other hand, if you aren’t happy with any of these options, do some research, says Ulmer. “Talk to people who you think are financially savvy and ask them for referrals. Then consult with three different advisors to see what’s the best fit for you.”

    Approach the provider you want to transfer to—not from

    Thankfully, you don’t have to have a big meeting or emotional “break-up” conversation to initiate an RRSP transfer. Instead, contact the provider you want to transfer the funds to with the request to move over the specified accounts. They will need the names of the financial institutions where you have your other RRSPs and the account numbers to fill out the appropriate form (CRA T2033, Transfer Authorization for Registered Investments), which they will send to you to sign and return. Some providers even handle all of this online. “They’re in the business of increasing assets under management, so they want to make it easy to transfer your money to them,” says Trahair.

    Opt for “in kind” transfers, where possible

    The provider you’re going with will ask you if you want to move the assets over “in cash” (which means all your investment holdings will be sold before they are transferred) or “in kind” (which means all your investments go over exactly as is). Both Trahair and Ulmer say to transfer your investments in kind, so long as the receiving institution can hold those investments. (Some proprietary mutual funds, for example, may not be available to other providers.)

    There are a couple of reasons why experts prefer in-kind over in-cash transfers. First, the timing may not be in your favour. If, for example, you happen to liquidate your investments right after a downturn, that money could be out of the market for a few weeks before it gets transferred and reinvested and you could miss the market rebound. In other words, you could end up breaking the first rule of investing by selling low and buying high. Second, selling your investments could trigger “back-end” fees, as explained below.

    Be aware of possible deferred sales charges for “in cash” transfers

    Some investment funds incur deferred sales charges (DSC) if you sell them within a specified number of years (typically seven) from the date of purchase. Those fees can be quite hefty and really add up, so you’ll want to avoid them if at all possible. Find out if you have any DSC funds and, if so, what the redemption schedule is. If you’re beyond that period, you can sell your holdings with no strings attached. If not, you can sell up to 10% of the fund every year without paying the fee, says Trahair. 

    “An advisor should think to check for deferred sales charges when you transfer investments to them,” says Ulmer. Otherwise, it’s a red flag that they’re failing to protect clients from unnecessary fees.

    DSCs will be less of a concern in the future—Canadian regulators banned the sale of mutual funds with DSCs on June 1, 2022. However, the redemption schedules for any existing DSC mutual funds still apply.

    Ask about account closing fees

    Although there shouldn’t be any fees to transfer your RRSPs, you might need to pay $50 to $100 to close each old account. Make sure to ask the receiving institution if it will cover all or part of those fees. It may be willing to do so to gain your additional business.

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    Tamar Satov

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  • Why did the stock markets fall? – MoneySense

    Why did the stock markets fall? – MoneySense

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    Anxiety over the U.S. economy

    Despite some signs of cooling, the U.S. economy kept chugging along even with higher rates, outpacing Europe and Asia. Then came last week’s economic reports.

    Weak reports on manufacturing and construction were followed by the government’s monthly report on the job market, which showed a significant slowdown in hiring by U.S. employers. Worries that the U.S. Fed may have kept the brakes on the economy too long spread through the markets.

    Big Tech movements

    A handful of Big Tech stocks drove the market’s double-digit gains into July. But their momentum turned last month on worries investors had taken their prices too high and expectations for their profit gains had grown too difficult to meet—a notion that gained credence when the group’s latest earnings reports were mostly underwhelming.

    Apple fell more than 5% Monday, after Warren Buffett’s Berkshire Hathaway disclosed that it had slashed its ownership stake in the iPhone maker. Nvidia lost more than $420 billion in market value Thursday through Monday. Overall, the tech sector of the S&P 500 was the biggest drag on the market Monday.

    Japan’s rollercoaster

    The Nikkei suffered its worst two-day decline ever, dropping 18.2% on Friday and Monday combined. One catalyst for the outsized move has been an interest rate hike by the Bank of Japan last week.

    The BoJ’s rate increase affected what are known as carry trades. That’s when investors borrow money from a country with low interest rates and a relatively weak currency, like Japan, and invest those funds in places that will yield a high return. The higher interest rates, plus a stronger Japanese yen, may have forced investors to sell stocks to repay those loans.

    What should investors do now?

    The prevailing wisdom is: Hold steady. Experts and analysts encourage taking a long view, especially for investors concerned about retirement savings. “More often than not, panic selling on a red day is generally a great way to lose more money than you save,” said Jacob Channel, senior economist for LendingTree, who reminds investors that markets have recovered from worse sell-offs than the current one.

    Bitcoin was back up to $56,490 Monday morning after the price of the world’s largest cryptocurrency fell to just above $54,000 during Monday’s rout. That’s still down from nearly $68,000 one week ago, per data from CoinMarketCap.

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    The Canadian Press

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  • Making sense of the markets this week: August 4, 2024 – MoneySense

    Making sense of the markets this week: August 4, 2024 – MoneySense

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    Mixed results for Magnificent 7 

    The narrative around the Magnificent 7 mega-cap technology stocks has become mixed, even in the face of mostly positive earnings news.

    Microsoft stock sold off on Tuesday even after the company narrowly beat Wall Street expectations for its fiscal fourth-quarter results and handily surpassed results from a year ago. Investors have been scrutinizing figures for AI operations in particular; Microsoft’s Intelligent Cloud revenue rose 19% year over year and contributed 8 percentage points of growth to its Azure and other cloud services revenue, which grew 29%. Evidently, that wasn’t enough.

    Facebook and Instagram owner Meta Platforms, by contrast, easily bested analyst forecasts for the second quarter. It boosted net income by 73% over the same quarter last year and is gaining advertising market share over archrival Alphabet. Compared to its Mag 7 peers, Meta has been a stock-market laggard since 2022 but undertook a cost- and job-cutting campaign that now appears to be paying off.

    Apple likewise surpassed expectations for revenue and earnings, posting particularly strong results in its iPhone and iPad divisions. Cloud services, computers and wearables were in line with estimates.

    Amazon was punished after missing the analyst consensus for revenue, even though it beat estimates for earnings. Though Amazon Web Services performance was strong, the company’s core retail and advertising businesses disappointed.

    Microsoft, Meta, Apple, Amazon earnings highlights

    Currency figures in this section are reported in USD.

    • Microsoft (MSFT/NASDAQ): Earnings per share of $2.95 (versus $2.94 predicted). Revenue of $64.7 billion (versus $64.5 billion estimate).
    • Meta Platforms (META/NASDAQ): Earnings per share of $5.16 (versus $4.63 expected). Revenue of $39.07 billion (versus $38.31 billion estimate).
    • Apple (AAPL/NASDAQ): Earnings per share of $1.40 (versus $1.35 expected) . Revenue of $85.78 billion (versus $84.53 billion estimate).
    • Amazon (AMZN/NASDAQ): Earnings per share of $1.26 (versus $1.03 expected). Revenue of $147.98 billion (versus $148.56 billion estimate).

    The U.S. Fed stands pat for now

    There were no assassination attempts or presidential nominees dropping out of the race for the White House this week. The news out of Washington, D.C. on Wednesday, however, was just as closely watched by markets. 

    The U.S. Federal Reserve elected to hold its overnight lending rate at 5.5%. In a statement, the central bank’s Open Market Committee acknowledged signs of a slowing economy but said it would not cut rates “until it has gained greater confidence that inflation is moving sustainably toward 2%.” The market continues to pin its bets on a rate cut in September, which would be the first since 2020.

    That leaves the Bank of Canada, which has cut rates in both of the last two months, a full percentage point below the U.S. Fed. The Canadian dollar nonetheless gained slightly against the greenback, at USD$0.72485, in the wake of the announcement, suggesting the policy decision was expected.

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    Michael McCullough

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  • Cenovus Energy reports earnings for Q3, reaches debt reduction target – MoneySense

    Cenovus Energy reports earnings for Q3, reaches debt reduction target – MoneySense

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    In July, after several years of prioritizing debt repayment, Cenovus reached its debt reduction target—bringing its total net debt to $4.0 billion. The milestone means Cenovus will no longer be regularly directing a portion of its cash flow towards its balance sheet, a development that frees up funds for other purposes.

    Cenovus’s plans for excess cash

    But McKenzie said the excess cash will be 100% returned to shareholders, most likely in the form of share buybacks, and won’t be used to embark on any new growth strategies or M&A opportunities.

    “It’s going to be good to run this business model at 100% shareholder returns going forward, and that’s really what we’re focused on today—just sticking to our knitting and executing on what’s in front of us, versus trying to take on new challenges or modifying strategies,” McKenzie told analysts and reporters.

    Cenovus earnings report highlights

    • Cenovus (CVE/TSX) reported second quarter earnings of $1 billion Thursday, up from $866 million in the same quarter last year. Earnings worked out to $0.53 per diluted share, up from $0.44 from last year.

    The company said its excess free funds flow in the quarter ending June 30 was $735 million, up from $505 million in the same quarter a year earlier. The company reported revenues of $14.9 billion for the second quarter, up from $12.2 billion for the same quarter last year.

    In the second quarter, Cenovus loaded its first vessels at the Westridge Marine Terminal in Vancouver following the successful startup of the Trans Mountain pipeline expansion, on which it is a major contracted shipper.

    Notes for the rest of 2024

    In light of strong year-to-date results, Cenovus revised its 2024 production forecast Thursday. The company now expects total upstream production of between 785,000 and 810,000 barrels of oil equivalent per day, up from a prior forecast of 770,000 to 810,000 boe/d.

    McKenzie said Cenovus is now nearly 90% finished construction the Narrows Lake tie-back at its Christina Lake oilsands site. The tie-back project is a 17-kilometre pipeline that connects the Narrows Lake reservoir to the Christina Lake main processing facility, and will result in up to 30,000 barrels per day of additional production from the site starting in late 2025. 

    The company also continues to work to improve performance at its U.S. refinery operations, which in recent years have been affected by unplanned outages and maintenance issues.

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    The Canadian Press

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  • Making sense of the markets this week: July 28, 2024 – MoneySense

    Making sense of the markets this week: July 28, 2024 – MoneySense

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    Biden’s withdrawal soothes bond market, deflates “Trump trade”

    Compared to the way U.S. President Joe Biden’s decision not to run for a second term shook the political world, the markets seemed nonplussed—on the surface, at least. 

    Biden’s U-turn took some air out of the “Trump trade” in stock, bond and cryptocurrency markets. Stock markets overall rebounded the day after the announcement, with mega-cap technology stocks leading the way. But oil and gas stocks and cryptocurrencies—foreseen to fare better under a Donald Trump administration—retrenched. 

    The Republican nominee is seen as a bigger deficit spender than whomever the Democrats might settle on, so a Trump/Vance administration is expected to usher in higher inflation. That recently translated into a steeper yield curve for bonds as polls showed him ahead of Biden. However, that expectation of Trump as an inevitable shoo-in has now deflated and bond yields have flattened somewhat.

    However, Kristina Hooper, chief global market strategist at Invesco, warned investors to stay braced for more short-term volatility, “as the significant uncertainty about the new Democratic ticket might not be resolved until the party’s convention in August.” She also suggested that investors should pay closer attention to the U.S. Federal Reserve moves with respect to interest rates. (More on Canada’s recent rate cut below.)

    Something for Canadians and investors to ponder: As a senator, Vice President and Democratic front-runner Kamala Harris voted against the U.S.-Canada-Mexico trade agreement (USMCA), the successor to NAFTA (North American Free Trade Agreement) that was concluded by the Trump administration in 2020. At the time, she cited the lack of environmental protections for her decision.

    Bank of Canada cuts rates again

    Speaking of monetary policy, on Wednesday Bank of Canada (BoC) governor Tiff Macklem announced a second quarter-point cut to interest rates in as many months bringing the overnight lending rate down to 4.5%. Further, Macklem hinted there would be more cuts to come this year; provided inflation continues to subside towards the Bank’s 2% target. The country’s Consumer Price Index (CPI) increased 2.7% year-over-year in June, down from a 21st-century high of 8.1% two years earlier.

    The rate cut was widely expected by markets. 

    “Today’s decision to cut was consistent with our call, and that of broader market consensus which had upped the odds of reduction following a cascade of recent data which showed decelerating inflation, slack in the labour market and underperforming economy.”

    – Brian Yu, AVP and chief economist for Central1 Credit Union.

    The BoC is forecasting 1.2% GDP growth this year, 2.1% in 2025 and 2.4% in 2026, which sounds OK until you consider population growth is currently running at 3%. Regardless, the rate cut provides some relief to mortgage holders and support for bond markets.

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    Michael McCullough

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  • Making sense of the Bank of Canada interest rate decision on July 24, 2024 – MoneySense

    Making sense of the Bank of Canada interest rate decision on July 24, 2024 – MoneySense

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    What is the Bank of Canada’s interest rate?

    This latest decrease brings the central bank’s rate—which sets the benchmark for Canada’s prime rate and variable-rate borrowing products—to 4.5%.

    Combined with last month’s decrease, the benchmark cost of borrowing in Canada is now down 0.5% and is at its lowest since May 2023.

    What does the rate cut mean? Will the interest rate cuts continue?

    In the immediate aftermath of today’s rate cut, Canada’s prime rate will decrease from 6.95% to 6.7%, with consumer lenders passing that discount onto their prime-based products, including variable mortgage rates and home equity lines of credit (HELOCs).

    While the outcome of today’s BoC announcement was expected—markets had priced in an 80% chance of a cut—the language in the central bank’s news release was surprisingly cheerful. The central bank usually keeps its cards close to its chest in terms of future cuts, but it wasn’t afraid to come across more dovish today, pointing to the progress made thus far on inflation.

    It noted its preferred Consumer Price Index (CPI) “core measures” (called the CPI trim and median) have both trended under 3% in the last few months. The BoC also suggested that inflation will settle around 2%—the target the central bank wants to see—by 2025.

    That translates to more cuts to come. The question now, though, is whether another quarter-point cut will come in September and/or December. And, of course, just how many more cuts will come in 2025. 

    Currently, analysts believe the BoC’s cutting cycle will bottom out at 3%, which would require another six quarter-point cuts. 

    Of course, the BoC maintains that future cuts will depend heavily on inflation, stating, “Monetary policy decisions will be guided by incoming information and our assessment of their implications for the inflation outlook.” That means the markets will be watching upcoming CPI reports like a hawk. 

    What does the BoC rate announcement mean to you?

    …if you’re a mortgage borrower

    Renewing or borrowing, this is good news for Canadian home owners.

    The impact on variable-rate mortgages

    If you’ve stuck it out this far with a variable mortgage rate, you’re being rewarded today. As a result of today’s rate cut, your mortgage rate and payment will lower in kind immediately, if you’re in an adjustable-rate mortgage. If you’ve got a variable mortgage rate with a fixed payment schedule, more of your payment will now go toward your principal mortgage balance, rather than servicing interest.

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    Penelope Graham

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  • Making sense of the markets this week: July 21, 2024 – MoneySense

    Making sense of the markets this week: July 21, 2024 – MoneySense

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    Inflation continues to fall as temperature rise

    As we’re moving through summer’s dog days and heat records are being broken around the world, Canadian inflation is moving in the opposite direction. Statistics Canada released that the year-over-year Consumer Price Index (CPI) increase cooled to 2.7% in June. As inflation continues its downward trend, it generally indicates that the Bank of Canada’s monetary policy is working.

    Source: Statistics Canada

    Consumer price index June 2024 report highlights

    The main takeaways from the monthly CPI report are:

    • Core CPI (excluding food and energy) stayed stubbornly higher than the headline CPI, coming in at an annualized 2.9%.
    • Shelter continues to dominate the overall inflation picture, as prices were up 6.2%.
    • Services, another major inflation concern, were up 4.8%.
    • Durable good prices have substantially deflated, as they fell at an annualized rate of 1.8%.
    • Similarly, prices for clothes and shoes were down 3.1%.
    • Gas prices were down 3.1% from May to June, and have been pretty stable over the last year.
    • Grocery prices went up at an annualized rate of 2.1%, lower than the overall CPI figure.

    The business and individual sentiment surveys point to decreasing inflation expectations going forward, and are significant indicators that the Bank of Canada (BoC) has succeeded in curbing the scariest runaway inflation scenarios. The early 1980s saw the rise of denim and ultra-high interest rates. While ’80s fashion might be back, it’s pretty clear that the era’s monetary policy isn’t.

    Decreased inflation is welcomed news by many Canadians, but it’s probably cold comfort to those with mortgages due for renewal this month. The country as a whole might be happier that demand-pull inflation is down, but that just really means: “People have way less money to spend on most things because their mortgage or rent payments just went through the roof.”

    The lower inflation rates and decreased inflation sentiments should empower the BoC to continue to slowly but surely cut interest rates in the coming months. It would be shocking if the BoC didn’t lower interest rates by 0.25% when it makes its decision next week.

    To check out the effects of inflation rates right now, use this table. 

    powered by Ratehub.ca

    Read more: Canada’s inflation rate falls to 2.7% in June, driving hopes for July rate cut

    Netflix subscribers must be nostalgic for TV commercials

    Earnings day went largely as predicted for Netflix last Thursday, as earnings and revenues were quite close to the company’s guidance last quarter.

    Netflix earnings highlights

    Currency figures in this section are reported in USD.

    • Netflix (NFLX/NASDAQ): Earnings per share of $4.88 (versus $4.74 predicted). Revenue of $9.56 billion (versus $9.53 billion estimate).

    Netflix sold more memberships than was predicted (277.65 million versus 274.40 million). The bulk of that subscriber growth was in its advertising-supported platform. The markets seemed to take the news in stride, as share prices were largely flat in after-market trading.

    Netflix co-CEO Ted Sarandos highlighted the company’s focus on ads going forward, saying that the streamer would no longer partner with Microsoft. Instead, it’s investing in its own platform. He also mentioned that Netflix’s push into live sports would attract more ad dollars, specifically mentioning the NFL games on Christmas Day as important opportunities. He summed up the company’s push into live sports saying, “We’re in live [TV] because our members love it, and it drives a ton of engagement and a ton of excitement… and the good thing is advertisers like it for the exact same reason.”

    With Netflix up over 43% this year, and at a price to earnings (P/E) ratio of over 44, one could make the argument the stock is priced appropriately, and that it will have to expertly execute future growth plans to have any chance of justifying that high price tag.

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    Kyle Prevost

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  • Making sense of the markets this week: July 14, 2024 – MoneySense

    Making sense of the markets this week: July 14, 2024 – MoneySense

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    Are U.S. rate cuts on the way?

    While Canada’s inflation rate is obviously at the forefront around decision making for the Bank of Canada (BoC) in setting the key interest rate, inflation below the border is also a major consideration. Arguably, policymakers are loath to devalue the Canadian dollar beyond a certain level. Consequently, if U.S. inflation stays high—and U.S. interest rates correspondingly stay high—it will likely impact just how quickly the BoC can cut our interest rates.

    “The Canadian and American economies are very closely intertwined, especially when it comes to the cost of borrowing. Historically the BoC and the Fed have mirrored each other in terms of monetary policy (the act of cutting, holding, or hiking their benchmark interest rates).”

    —Penelope Graham, mortgage expert

    Markets were mostly flat on Thursday after the U.S. Bureau of Labor Statistics announced that headline CPI was down 0.1% from May, and the 12-month inflation reading was now 3%.

    Source: CNBC

    U.S. inflation highlights

    The CPI report included the following details:

    • Core CPI (excluding food and energy) increased 0.1% and up 3.3% from a year ago.
    • Gas prices were down 3.8%.
    • Food prices were up 0.2%.
    • Shelter prices were up 0.2%.
    • Used vehicles prices were down 1.5%.
    • Real hour earnings were up 0.4% for the month.

    Overall, the down-trending inflation rate, as well as Fed Chairman Jerome Powell’s comments about holding interest rates too high for too long this week, both seem to indicate a probable rate cut in September. CME Group’s FedWatch tracker uses futures contracts to predict the likelihood of interest rate movements, and it currently shows a strong likelihood of two interest rate cuts before the end of 2024. There is even a 40% probability of three cuts before year end.

    Obviously this is welcome news to indebted Americans, but also to Canadian consumers who want to see interest rates come down here sooner rather than later.

    —Kyle Prevost

    Pepsi’s revenues taste flat

    Beverage-and-snack behemoth PepsiCo released lukewarm earnings news on Thursday. For those who aren’t familiar with Pepsi’s corporate structure, it long ago ceased to be a single-beverage entity. With brands ranging from numerous snack and soft drink choice to breakfast cereals, Pepsi is a diversified food conglomerate, including FritoLay and Quaker.

    Source: Chathura Nalanda via LinkedIn

    Pepsi earnings highlights

    All figures in U.S. dollars.

    • PepsiCo (PEP/NASDAQ): Earnings per share came in at $2.28 (versus $2.16 predicted) on revenues of $22.50 billion (versus $22.57 billion predicted). Shares were down nearly 2% in early trading on Thursday.

    The company cited a declining demand in North America as the main factor in slowing revenue growth. Company executives explained that North American consumers were becoming more price conscious after failing to “push back” on significant price increases over the last few years. Low-income shoppers were highlighted as being the most willing consumer group to shift to cheaper private-label options. As well, increasing agricultural commodity costs were cited as an increasing operating expense. It’s worth noting that some market watchers believe weight-loss drugs, such as Ozempic and Wegovy, may curb demand for snack foods in the North American market.

    FritoLay’s North America sales were down 4% year over year, while North American beverages were down 3%. Those sales declines were offset by international revenue increasing by 7% year to date. Management highlighted that this was the 13th straight consecutive quarter with at least mid-single-digit organic revenue growth for international operations.

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    Kyle Prevost

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  • AI ETFs in Canada: How investors can ride the AI wave – MoneySense

    AI ETFs in Canada: How investors can ride the AI wave – MoneySense

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    Not just domestic fund managers like Evolve and CI are entering the Canadian AI ETF scene. Invesco Canada offers INAI, which tracks a namesake index for a 0.35% management fee. The index is actively managed by the “Morningstar Equity Research Next Generation Artificial Intelligence Committee” which reviews and assigns exposure scores for holdings, making it less passive than some might expect. 

    The index focuses on four sub-themes (generative AI, data and infrastructure, software and services) and includes notable foreign holdings like Taiwan Semiconductor Manufacturing. INAI is not currency hedged but does offer a Canadian dollar-hedged version, INAI.F.

    Finally, Global X ETFs (formerly Horizons) actually offers not one, but two AI thematic ETFs: AIGO and RBOT. 

    AIGO, which made its debut on May 14, 2024, tracks the Indxx Artificial Intelligence & Big Data Index by wrapping a U.S. Global X listed AI ETF in a fund of funds structure. It charges a 0.49% management fee and is not currency hedged. AIGO’s underlying U.S. ETF currently holds companies like Nvidia, Qualcomm, Broadcom, Netflix, Meta and Tencent, showcasing a broader semiconductor and communications focus.

    RBOT, by contrast, has been around much longer, having listed in 2017, and has accumulated about $55 million in assets. It charges a 0.45% management fee, which amounts to a 0.64% MER along with a 0.04% trading expense ratio (TER). RBOT tracks the Indxx Global Robotics & Artificial Intelligence Thematic Index, which focuses more on applied robotics and automation rather than just software, including healthcare companies like Intuitive Surgical and foreign manufacturers like Yaskawa Electric Corp.

    Investing in any of these ETFs is straightforward. Simply enter the ETF’s ticker in your brokerage application, decide on the number of shares you wish to buy and at what price (using a limit order is recommended), and be patient as your transaction completes.

    While the rapid expansion of the AI sector and the flurry of new AI ETFs in Canada are undeniably exciting, I can’t help but draw parallels with the dot-com bubble of the late 1990s, particularly the rise and fall of Cisco Systems. 

    At its peak, Cisco briefly surpassed Microsoft as the world’s most valuable company, with a market cap nearing $500 billion, riding the wave of the internet and networking boom.

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    Tony Dong

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  • “We’re set for life. Should we cash out an RRSP?” – MoneySense

    “We’re set for life. Should we cash out an RRSP?” – MoneySense

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    Withdrawing from an RRSP before age 70

    Are you thinking you’d like to withdraw everything from your RRSP before starting your OAS or age 70? This way, if you die after age 70, there’s no RRSP/RRIF to transfer to your wife, no resulting income increase for her, and therefore no OAS clawback. This sounds like a good idea; let’s play it out and see. Start by converting your RRSP to a RRIF (registered retirement income fund) so you can split your pension income with your wife; you cannot split RRSP withdrawals.

    To deplete your RRIF of $200,000 plus investment growth within five years, draw out about $45,000 a year and, at the same time, delay your OAS pension until age 70. The OAS pension increases by 0.6% per month for every month you delay beyond age 65 and if you delay until age 70 it will increase by 36%, guaranteed, and it is an indexed pension that will last a lifetime under current legislation.

    What may have been a little better is delaying your CPP as it increases by 0.7%/month and the initial pension amount is based off the YMPE (yearly maximum pensionable earnings) which has historically increased faster than the rate of inflation, meaning that by delaying CPP to age 70 it may increase by more than 42%. 

    With your RRIF depleted, your wife will not experience an OAS clawback if you die before she does. Mission accomplished, but we should question the strategy. What are you going to do with the money you take out of your RRIF and how much money will you have after tax? 

    Consequences of accelerated withdrawals from a RRIF

    I estimate that, in Ontario, your $45,000 after-tax RRIF withdrawal will leave you with $28,451 to invest. So, rather than having $45,000 growing and compounding tax sheltered you will have $28,451 growing and compounding. Ideally, if you have the room, you will invest this money in a tax-free savings account (TFSA), where it will also be tax sheltered, otherwise, you will invest in a non-registered account. A non-registered account means paying tax on interest, dividends and/or capital gains as they are earned, probate and no pension income splitting. 

    I should acknowledge that, if your intention is to spend the RRSP and have fun that is a perfectly suitable strategy, especially when you know the income, you need is $147,000 per year and you have indexed pensions to support that income. The problem for me is it makes for a short article, so let’s continue the analysis. 

    What would happen if, instead of drawing everything from your RRIF, you drew just enough to supplement your OAS pension while delaying it to age 70? What if, at age 72, your RRIF remains at about $200,000 and the mandatory minimum withdrawal is $10,800. You could split that $10,800 with your wife and not be subject to OAS clawback. Of course, when you die the RRIF will transfer to your wife, who will no longer be able to pension split and her OAS pension will likely be impacted.

    Stop trying to predict the future and enjoy your money

    Randy, I think you can see there is no clear-cut winning strategy here. Either draw RRSP/RRIF early or leave it to grow. You may read about strategies involving income averaging or early RRIF withdrawals to minimize tax, but often I find these to be more smart-sounding strategies rather than winning strategies. There are so many variables to account for, the analysis must be done using sophisticated planning software in conjunction with your life plan.

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    Allan Norman, MSc, CFP, CIM

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  • Making sense of the markets this week: July 7, 2024 – MoneySense

    Making sense of the markets this week: July 7, 2024 – MoneySense

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    Prediction: Tesla will finish the year down 30%

    Let’s wait and see how this one goes. If I wrote this column a week ago, I would have said Tesla looked like an excellent bet to be down 30% by year end. But shares jumped more than 10% this week on its positive second-quarter news. Despite the high numbers for vehicle deliveries, it has been a volatile year for Tesla shareholders, with prices down 42% at one point. Our central thesis was that decreased profit margins and increased competition would lead to lower profit projections. That still feels solid to me. 

    Prediction: Crypto might be volatile, but could finish 2024 up 50%

    This one hit the bullseye. After going on a tear in February, bitcoin was down almost 20% between mid-March and the beginning of May. 

    Source: Google Finance

    Overall, bitcoin only has to go up slightly over the next six months to meet that 50% return prediction. Of course, I believe the asset will be ultimately worth very little in the long term. Admittedly, I’m quite skeptical about crypto.

    Prediction: U.S. election in November will be chaotic

    We also predicted that this election year would be more chaotic than most, even though U.S. election years are historically quite positive for U.S. stock markets. We shied away from making too many specific predictions about how a Biden/Trump victory would impact stock-market prices, but said many market-watchers would be cheering for a split government. 

    Well, it’s certainly been chaotic in the headlines. As the rest of the world watches in disbelief, the 2024 U.S. election has so far proven to be the most volatile campaign in recent memory—and maybe of all time. At this point, betting markets think it’s a coin toss as to whether Biden even makes it as the Democratic Party nominee. Ordinarily, a political candidate running against a convicted felon would be an easy win. Then again, ordinarily, a candidate running against an incumbent whose own party isn’t sure he’s still right for the job would be an easy win as well.

    Given all the variables, we don’t even know how to measure the degree of accuracy of this prediction. We did reluctantly predict a very slim Biden victory, and that doesn’t look like such a great prognostication now that Trump is a fairly strong betting favourite. However, our strong feeling was that a split government would lead to a robust end of the year for U.S. stocks. That scenario could still be very much in play. We’re going to wait to fully assess this one.

    What’s left of 2024?

    After a very accurate round of 2023 predictions, we were statistically unlikely to repeat the feat in 2024. While we may have called it wrong about U.S. tech, I think there’s a good chance we’re going to get the big picture stuff right—by the end of the year. Despite a ton of negative headlines and general “bad vibes” over the last six months, one of my big takeaways is that the world’s stock markets (and especially America’s) should continue to reward patient Canadian investors.

    Read more about investing:



    About Kyle Prevost


    About Kyle Prevost

    Kyle Prevost is a financial educator, author and speaker. He is also the creator of 4 Steps to a Worry-Free Retirement, Canada’s DIY retirement planning course.

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    Kyle Prevost

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  • Making sense of the markets this week: June 30, 2024 – MoneySense

    Making sense of the markets this week: June 30, 2024 – MoneySense

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    If the summer heat doesn’t get you, inflation will

    Canadians hoping for interest rate relief will likely have to wait a bit longer. The Consumer Price Index (CPI) reading for May came in at 2.9%, according to Statistics Canada. 

    The money markets predict a 45% chance that the Bank of Canada (BoC) will cut rates at its July 24 meeting. Lowering interest rates after a month of renewed inflation worries would carry a large credibility risk for the BoC, after it raised rates so quickly to restore faith that it would tame inflation over the long term.

    CPI May 2024 highlights

    Here are some notable takeaways from the CPI report:

    • May’s overall 2.9% CPI increase was 0.2% higher than April’s 2.7% CPI increase.
    • Renters in Canada continue to get slammed, as the year-over-year increase in rent was 8.9%.
    • Mortgage interest costs also massively grew, by 23.3%.
    • Core CPI (stripping out volatile items such as gas and groceries) was 2.85%.
    • The cost of travel also jumped, with airfare up 4.5% and tours up 6.9%.
    • Gasoline costs were up 5.6%.
    • In slightly better news, grocery prices were only up 1.5% year-over-year, but they’re up 22.5% since May 2020.
    • Cell phone services continue to be a bright spot for deflation, as they are down 19.4% since May 2023.

    We’re sure the BoC was hoping for inflation to be closer to 2.5%, which would allow it to justify cutting interest rates and point to a stronger downward trend for inflation. Continuing to balance long-term growth and full employment versus controlled inflation isn’t going to get easier anytime soon for BoC governor Tiff Macklem and his team. 

    For now, savers will continue to benefit from higher interest rates, like those of guaranteed investment certificates (GICs) and high-interest savings accounts (HISAs), while borrowers keep hoping for relief sooner rather than later. And, of course, to read about how to invest in a high-inflation world, see our article on the best low-risk investments at MillionDollarJourney.com.

    FedEx delivers, Nike just doesn’t do it

    It was a tale of two extremes in U.S. earnings this week as FedEx shareholders became quite happy, while Nike investors were down in the dumps.

    U.S. earnings highlights

    This is what came out of the earnings reports this week. Both Nike and FedEx report in U.S. dollars.

    • Nike (NKE/NYSE): Earnings per share of $1.01 (versus $0.83 predicted). Revenue of $12.61 billion (versus $12.84 predicted).
    • FedEx (FDX/NYSE): Earnings per share of $5.41 (versus $5.35 predicted). Revenue of $22.11 billion (versus $22.08 billion predicted).

    Nike finance chief Matthew Friend found himself in an odd position on his earnings call with analysts on Thursday. On one hand, Nike’s effort to reduce costs by shedding 1,500 jobs is paying off, and earnings per share came in substantially higher than experts predicted. On the other hand, declining sales in China and “increased macro uncertainty” were cited as reasons for a predicted sales drop of 10% in the next quarter. Investors chose to see the half-empty part of the glass, as shares plunged more than 12% in after-hours trading.

    Friend attempted to put the downward forecast in perspective: “While our outlook for the near term has softened, we remain confident in Nike’s competitive position in China in the long term.” Nike highlighted running, women’s apparel and the Jordan brand as growth areas to watch going forward.

    FedEx had a much better day, as shares were up more than 15% after it announced earnings on Tuesday. Future earnings projections were up on the news of increased cost-cutting efforts that will save the company about $4 billion over the next two years. FedEx announced possible increased profit margins as a result of consolidating its air and ground services.

    Cash-strapped consumers pinch Couche-Tard

    Canada’s 13th-largest company, the gas and convenience store empire known as Alimentation Couche-Tard, announced its earnings on Tuesday.

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    Kyle Prevost

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