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Good morning. It’s less than a month until the traditional summer break, at least for any young kids you might have, which is supposed to be a time to relax, but maybe not this year. More than a third of professionals say they’re feeling more burnt out than a year ago, according to a recent survey by consulting firm Robert Half Canada Inc. Heavy workloads (54 per cent) and a lack of communication and support from management (29 per cent) were the top two reasons given. And while you’d expect younger generations and working parents to struggle, so too are employees who have been with their company for two to four years.
Retail investors — those not driven by algorithms or corporate strategies — are struggling as well and have been sitting on the sidelines as markets remain sluggish. Central banks seem unsure what to do with interest rates, with signs that the United States Federal Reserve might pause its hikes while the Bank of Canada could resume its inflation-fighting ways given that economic data continues to come in stronger than policymakers want.
But whether central bankers hike or not almost seems like a quaint argument given the markets finally latched onto the debt-ceiling debate raging in the United States, adding to a banking crisis down south, geopolitical tensions, China’s stalling recovery and mounting global debt, especially in Canada, which has the most indebted households in the world.
“At best, then, it seems like markets are set to tread water for a little while longer,” says Kevin McCreadie, chief executive and chief investment officer at AGF Management Ltd. “In doing so, it’s also likely that investors continue crowding into a small number of ‘quality’ technology stocks that are thought to provide greater downside protection in this type of environment. But that’s not necessarily a good thing.”
Just because a handful of megacaps are going gangbusters — most recently, chipmaker Nvidia Inc. — does not mean the market as a whole is healthy, as McCreadie, Financial Post columnist Martin Pelletier and others have pointed out. Generally speaking, healthy equity markets offer broad-based opportunities, giving investors a chance to pick and choose what kinds of risks they’re willing to take in order to get their desired returns. The S&P 500 could be called the S&P Seven this year, since it’s mostly flat without the Big Tech players, all of whom are buoyed by the expectation that interest rates will be cut sooner rather than later.
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“The fundamental backdrop remains weak, with limited market breadth and the U.S. 2s/10s yield curve inverting further back to where it was in early March (-77 basis points),” says economist David Rosenberg in this past Wednesday’s Breakfast with Dave note. “Even with the positive developments on the debt-ceiling front, the equity market is starting to wobble again, and 4,200 on the S&P 500 has yet again proven to have been a ceiling.”
Canada, of course, doesn’t really have much tech action, which is one reason why the S&P/TSX composite is flat for the year, though it’s down on a six- and 12-month basis since it’s dominated by banks and energy, neither of which are doing that well for very different reasons. Still, investors are hoping economic conditions stay strong enough that we don’t tip into a recession, but not so good that policymakers will keep or resume hiking interest rates.
“I’m optimistic that the U.S. Federal Reserve and the Bank of Canada will maintain conditional pauses, and that other Western developed central banks will draw closer to the end of their respective tightening cycles,” says Invesco Ltd.’s chief global market strategist Kristina Hooper. “I think markets will soon begin to discount an economic recovery, even though sentiment is very pessimistic right now.”
In the meantime, Hooper suggests thinking of the U.S. debt-ceiling crisis “as just a financial form of allergy season: It’s going to get worse before it gets better, and we just need to ride it out until pollen counts go down and we can get back to normalcy.” Normal for newer investors likely means ever-rising indexes, but the rest of us know things are always a bit more stressful than that, so you should never stop learning from your mistakes, even if you’re already sipping Mai Tais by the pool.
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Andy Holloway, editor of the FPI and Financial Post Magazine, and senior features editor of the Financial Post. If you have any quips, queries or comments, get in touch at [email protected].
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5 more mistakes investors should learn from before the summer break is here
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School may be out soon, but investing veteran Peter Hodson has a few lessons left for us. From chasing hot investment trends to analyzing too many things, here are a handful of popular mistakes to correct before sitting back with our Mai Tais.
SOWING THE SEEDS
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Holding cash can seem like a good idea, but it can be riskier than buying stocks
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Investors fleeing to safety are always tempted to park their portfolio in cash or cash-like instruments, but investment adviser Taylor Burns says that comes with its own set of risks. One of the big ones is inflation eroding the purchasing power of our cash.
MONEY DOESN’T BUY HAPPINESS
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Ford Motor faces uphill journey in convincing investors of new vision
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Fewer vehicles, higher margins and profits from services are key to Ford Motor Co. chief executive Jim Farley’s vision, but investors seem “skeptical following years of sub-par financial metrics,” says auto analyst Philippe Houchois.
GETTING IN GEAR
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The new gold boom: How long can it last?
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The global elite and central banks are both rushing to buy gold, pushing the metal’s price close to its nominal all-time high of US$2,072 per troy ounce. Gold bugs are panting as they wait for a new price record as more investors look for safer havens.
GOLDEN DAZE
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FP 500 — The most authoritative survey of corporate Canada: The 2022 FP 500 is the only national ranking of the country’s public, private and Crown corporations, making it an indispensable research tool with vital data on Canada’s top companies across all sectors. Order your copy here.
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Good news if you’re invested in the S&P 500: The benchmark index has been pretty rangebound for a few months, with 4,200 or so the upper ceiling, but RBC Capital Markets has seen enough good news to increase its year-end price target to 4,250, up from its previous call of 4,100. “We’d stick with the best of the growth trade, but would also diversify by selectively adding exposure to value (our favourite value sector is energy),” says head of U.S. equity strategy Lori Calvasina.
Bad news if you’re a condo investor in Toronto: More than half of newly completed condo investors holding a mortgage last year lost money on their rental properties in the Greater Toronto Area even as rents soared to new highs, says a report by CIBC and Urbanation Inc. It’s the first time that threshold has been crossed and the average loss is about $400 a month.
Good news if you’re a Nvidia Corp. shareholder …: The chipmaker’s market valuation crossed the US$1-trillion threshold on Tuesday after its artificial intelligence prospects vaulted it into an elite club of just five American companies that include Alphabet Inc., Amazon.com Inc., Apple Inc. and Microsoft Corp.
… Unless you’re Cathie Wood: The Big Tech champion and manager of the ARK Innovation ETF says Nvidia is “priced ahead of the curve” given that it’s priced at 25 times estimated sales for the current financial year compared with about six times for its peers on the Philadelphia Semiconductor Index.
Bad news if you’re a Shopify Inc. shareholder: The e-commerce player’s stock dropped 2.9 per cent on Tuesday after it was revealed it faces a class-action lawsuit alleging it reneged on a deal it offered some employees who were recently laid off. The stock continued to fall on Wednesday before levelling off on Thursday.
Good news for Teck Resources Ltd. shareholders: Switzerland-based commodities giant Glencore PLC is working to improve its bid for the Canadian miner, say people familiar with the matter. Teck’s shares rose as much 4.4 per cent after the news broke on Wednesday and continued rising on Thursday.
Bad news if you’re a fan of commodities: Inflation remains high, but the prices of copper, wheat, natural gas and other inputs are crashing. “The drop in commodity prices seems to reflect the stuttering rebound of China, a looming U.S. recession and supply-side destruction in Europe,” says Carsten Brzeski, global head of macro at ING Research.
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What’s the best way to use RRSP contribution room accumulated through rental income?
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Creating extra contribution room in your registered retirement savings plan seems like a good idea, but certified financial planner Allan Norman says how to use it depends on the answers to many questions. Are you trying to create the biggest estate? The least amount of tax? Or the most you can spend?
GET THE ANSWER
If you have an investing or personal finance question, hit us up at [email protected].
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How changes to the alternative minimum tax system could affect Canadians
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Changes to the alternative minimum tax system could impact high-income earners, but also Canadians who have once-in-a-lifetime gain on the sale of a business or a vacation property. And that’s not all, says tax expert Jamie Golombek.
MINIMUM TAX, MAXIMUM INFO
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Worrying about money? There are ways to take back control of your fears
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We spend 15 hours a week worrying about our finances. That’s like working two extra days each week, but instead of earning a paycheque, it’s spent stressing about bills, routine expenses, debts or a lack of savings and it usually doesn’t lead to a solution. Credit counsellor Sandra Fry offers some ways to take back control.
CLEAR THE MIND
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Need help? Family Finance is here for you
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Worried about having enough money for retirement? Wondering how to make ends meet today? Need to adjust your portfolio? Drop us a line at [email protected] with your contact info and the general gist of your problem and we’ll try to find some experts to help you out while writing a story about it (we’ll keep your name out of it, of course).
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The biggest myths in personal finance that will cost you if followed blindly
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There’s a lot of financial advice out there to sift through, but not everything works for everybody in every situation. Certified financial planner Jason Heath looks at four of the biggest myths he encounters, including the one that says dividends are magical.
THE FAKE MAGIC OF MYTHS
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Planning to live a long, healthy life? Here’s how to make your money last
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We’re living longer than past generations, so making a financial plan to last until you’re 95 or 100 is prudent. But wealth adviser Ted Rechtshaffen says it’s important to know how many of those years will be healthy ones. Figuring that out should affect what you plan to do with your money.
AN AGE-OLD QUESTION
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