Looking for investing ideas? Here’s your weekly digest of the Globe’s latest insights and analysis from the pros, stock tips, portfolio strategies plus what investors need to know for the week ahead.
Who stands to lose from rising interest rates?
Will the world choke on rising interest rates? A modest move up in borrowing costs is already rattling global markets and causing some observers to worry about what lies ahead for the mighty U.S. economy. To date, the biggest casualties have been emerging-market countries with large amounts of U.S. dollar loans. As rising U.S. rates have propelled the greenback higher in recent months, the loans have become more expensive to service in terms of local currencies. At least a couple of developing countries are struggling to keep up, Ian McGugan writes.
This indicator will signal big problems ahead for Canada’s housing market
Canadian consumer spending and housing prices continue to climb, but at rates suggesting retail sales is resuming its role as a leading indicator for the residential real estate market. Consumer spending is more sensitive to short-term changes in economic growth because trips to the mall are at least in part discretionary and mortgage payments are not. We can expect that retail sales will weaken significantly before a major housing correction. Canadians struggling with high debt loads will first reduce spending in order to continue making mortgage payments.
Aecon’s beaten-up stock after blocked takeover offers intriguing opportunity for investors
Aecon Group Inc. didn’t work as a short-term takeover target. Perhaps the stock will look better as a long-term investment. If CCCC saw a compelling price at $20.37 a share – the proposed takeover price – investors should be intrigued now that the shares are trading significantly lower, even with another takeover deal looking unlikely, given the government’s decision. Although the proposed merger was touted as an opportunity to give Aecon access to bigger infrastructure projects globally, the Canadian company was certainly not struggling to find business before the Chinese suitors came calling.
What BlackRock’s chief investment strategist is predicting for the TSX and loonie for the rest of this year
Is the Canadian market ready to recapture another record high? Kurt Reiman, BlackRock’s chief investment strategist for Canada, thinks so. In an interview with The Globe and Mail, he shared his latest thoughts about equity markets, Canada’s currency, and how investors should position themselves.
Add these ETFs to your list of ways to protect a portfolio against rising rates
Mind the risks in a preferred share market dominated by rate-resets. If the economy stalls and bond yields fall, expect preferred shares and the ETFs that hold them to fall sharply in price. This is exactly what happened after rate resets were introduced following the last recession. The expectation was that rates would climb from there, but the opposite happened. Fearing their rate resets would be adjusted lower, investors sold these shares en masse. This debacle is reflected in the five-year result forthe BMO Laddered Preferred Share Index ETF (ZPR) — an annualized loss of 0.8 per cent. Rate resets were designed for just the sort of rising rate world we’re seeing now. So far, they’re holding up nicely.
With travel season, pain at the pump could add to Winnebago’s woes
Pain at the pump has compounded the woes of recreational vehicle companies whose share prices have crumbled this year. Winnebago Industries, the leading RV manufacturer and one barometer for U.S. consumer discretionary spending, has boasted sales above its 20-year average for four straight quarters. Still, its shares have lost more than a third of their value this year in the face of rising inventories, tariff concerns and an unusually long winter. The American Automobile Association expects gasoline prices to average $3 a gallon this summer. The U.S. Energy Information Administration has projected a 13.7 percent increase at the pump since last summer. The EIA expects diesel, which powers many of the largest RVs, to be 12.7 percent costlier this summer. This could discourage RV owners from roaming and also could scare off prospective buyers.
What investors need to know for the week ahead
Monday is a holiday in the U.S. and markets will be closed. The rest of the week will see the release of U.S. consumer confidence numbers and a Bank of Canada rate announcement. Companies posting their earnings include several big banks including Bank of Nova Scotia, Bank of Montreal, Laurentian Bank of Canada and National Bank of Canada. Reitmans, Costco, Lululemon Athletica and Canada Goose also release earnings results.