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Globe Investor Market predictions, dividend darlings and lessons from Canada’s biggest pension: Your guide to investing in 2019

The volatility that rocked the markets last year gives little indication of easing any time soon. Here’s what you need to know to protect and grow your money in the new year.



Investing lessons for 2019 and beyond from the country’s biggest pension fund

Eric Chow

The people managing the country’s largest pension fund oversee a portfolio far different than yours, Rob Carrick writes. But they’re guided by a few core principles that are relevant to everyday investors who value a simple, low-drama approach to long-term wealth-building. To start with, the Canada Pension Plan Investment Board doesn’t sweat a single bad year like 2018. You can’t properly assess your investment holdings and the strategy that binds them together until a block of years pass.

CPPIB assesses itself in ways that are relevant to individuals holding their stocks, exchange-traded funds and mutual funds. Geoffrey Rubin, senior managing director and chief investment strategist, says the board believes returns must exceed what a very simple, plain vanilla portfolio would have actually returned. An easy way to do similar in your portfolio is to measure your returns against various stock and bond indexes, or against balanced funds with a comparable asset mix to yours.

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Take a lesson from the CPPIB on fees by comparing what you paid and what you got in returns. Fees for the CPP’s investment portfolio come to 0.91 per cent with all costs considered, while a much simpler portfolio of globally diversified ETFs can be had for as little as 0.11 per cent (brokerage commissions extra).

More from Rob Carrick: Prepare for an uncertain 2019 with money tweaks that could help you save $2,400

Read more: Use these new benchmarks to gauge your DIY investing fees

Why 2019 could be a good year for dividend lovers

Eric Chow

Like the rest of the stock market, my model Yield Hog Dividend Portfolio had a rocky year in 2018, John Heinzl writes. But the vast majority of stocks in the model portfolio hiked their dividends: A&W Revenue Royalties Income Fund, Bank of Montreal, RBC, CIBC, Manulife Financial and Telus all announced multiple increases.

Now, what to expect in 2019? What I can say with a high degree of confidence is that most of the companies in my model portfolio will – barring some sort of global catastrophe – continue to raise their dividends in 2019, regardless of what happens to their stock prices.

I’ll even go a step further. For investors with a long-term horizon, I believe that now is a good time to shop for high-quality dividend stocks that have been caught in the market downdraft. Why? Two reasons: A lot of the bad news about trade wars and rising interest rates is already baked into stock prices, and dividend yields are higher now than they were a few months ago.

Read more: Oil, bank stocks, the loonie and more: The major market moves to prepare for in the new year

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BMO chief investment strategist: Stock investors are in store for a very happy 2019

Eric Chow

Forecasting the end of the bull market has been an almost monthly dynamic since March, 2009, writes Brian Belski, BMO Nesbitt Burns' chief investment strategist. The anxiety quotient has certainly been elevated as rhetoric, tariffs, flash crashes, sharp price corrections, noisy recession prognostications, peak earnings forecasts, flattening yield curves and midterm elections ruled the roost.

But remember, the environment remains very good for stocks – high-single-digit earnings growth, still low interest rates, 2.5-per-cent to 3-per-cent GDP and increased dividend growth. As such, for the first time in a few years, we find ourselves more optimistic relative to the consensus yet again and believe the S&P 500 will attain a year-end 2019 target of 3,150 points.

In the United States, communication services, financials, health care, industrials and technology represent our overweight sectors in the S&P 500, while consumer staples, real estate and utilities are our underweight sectors.

For Canada, given the resoundingly negative tone and lack of fundamental vision from investors, we cannot help but be contrarian. We believe the S&P/TSX Index will achieve a 2019 year-end target of 18,000. We strongly advise investors to take a bottom-up view and focus on companies with steady earnings, attractive valuations, and consistent dividend growth.

Communication services, energy and financials represent our overweight sectors in the S&P/TSX, while health care, real estate and utilities are our underweight sectors.

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Raymond James: These are the top 19 Canadian stocks for 2019

Raymond James equity analysts revealed their “Canadian Analysts’ 2019 Best Picks” list in a recent research report. The annual list is intended to be a “focused, static” selection of stocks with the objective of producing above-average price appreciation over the next year. This year’s group is comprised of 19 stocks from 14 different industrial sectors. “This process has typically resulted in reasonably balanced lists,” said Daryl Swetlishof, head of research, "although, in keeping with our Canadian coverage footprint, energy and natural resource stocks tend to have a higher weighting.” Get the full list and research notes here.

Desjardins Securities reveals its top stock picks for 2019

Heading into 2019, the equity research team at Desjardins Securities recommends investors “remain steadfast in looking for the best-positioned names” in order to battle through the current market volatility, David Leeder writes. In a recent research report, the analysts revealed their top 28 stock picks for the coming calendar year spread across eight sectors. The Desjardins and Raymond James picks overlap on only two companies: Boyd Group Income Fund and Enerplus Corp. Get the full Desjardins list plus sector summaries here.

What the most accurate forecaster of 2018 sees coming in the year ahead

The most accurate forecaster for 2018 among prominent sell-side research teams sees an attractive entry point for equity investors in 2019, Scott Barlow writes, but unfortunately, it won’t happen before a lot of market pain.

In January, 2018, the consensus view of strategists and economists was that a “synchronized global economic expansion” would push equity markets significantly higher during the year. Morgan Stanley U.S. equity strategist Michael Wilson and Britain-based global equity strategist Andrew Sheets, however, successfully predicted the market would face “difficult hand-off” as central banks normalized interest-rate policy. As a result, Morgan Stanley forecast a series of “rolling bear markets.” And that’s precisely what materialized in volatility-related ETFs, commodities, dividend stocks, technology stocks and credit markets through the year.

Now, Mr. Wilson sees a 50-per-cent chance of a U.S. earnings recession – two consecutive quarters of year-over-year losses – and a sharp slowdown in the U.S. economy for the year ahead.

Mr. Wilson believes that defensive market sectors such as consumer staples, utilities and real estate will continue to outperform as the year begins. But, the relative performance of defensive and cyclical (economically sensitive) equities indicates that markets have already priced in a major slowdown. This paves the way for a significant rally for cyclical stocks as the economic data bottoms out.

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As for what investors should buy when the opportunity arises, Mr. Wilson favours bank and financial stocks. He notes that U.S. large-cap bank valuations have declined by 34 per cent in the past 12 months and are now close to levels seen during recessions.

Read more Scott Barlow: The yield curve is saying something significant about what’s ahead for markets in 2019

Amid market turmoil, there are reasons to be optimistic about 2019

Look away from the dire headlines about plunging stock prices, and several indicators suggest the year ahead may not be quite as bad as many people fear, Ian McGugan writes. After a miserable quarter for equities worldwide, many stocks look reasonably priced.

Many of the standard warning signs have yet to flash red. The yield curve, a measure of how shorter-term interest rates compare to longer-term rates, typically inverts before a U.S. recession. That has yet to happen except in the relatively minor space between two- and five-year Treasuries.

Another much-watched indicator is retail sales growth. It usually declines sharply before the broad economy. So far, no such slackening is visible. Meanwhile, gold, the traditional haven in times of economic stress, has yet to show signs of panic by shooting upward.

And for all the gnashing of teeth over rising interest rates in Canada and the United States, monetary policy remains supportive. The world’s most closely watched benchmark, the federal funds rate set by the Federal Reserve, is still low by historical standards and hovers just barely above the rate of inflation, even after recent increases. No U.S. recession in the past half century has started with interest rates as low as they now are.

More to consider when managing your money this year

Five predictions for Canada’s mortgage market in 2019

David Rosenberg: Here’s how to increase your chances of financial success this coming year

Contrarian investor guide to 2019

Signs point to investors missing out on the ‘January effect’ this year

Cheer up: This is how long markets typically take to bounce back from a correction

From best to worst: Ranking the returns of all TSX Composite stocks in 2018

Portfolio manager on TSX: ‘Our outlook for 2019 is one of cautious optimism’

Defensive stocks top 2019 U.S. playbooks

Inflation fears are overblown: The Fed should pause in 2019

What wealth advisors are telling their clients in preparation for 2019

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