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Globe Investor Momentum stock picks, bonds bounce back and what CIBC’s Tal sees for ‘very difficult year’ ahead: What you need to know in investing this week

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.



Thinking about momentum investing? Here are three stocks to consider

Many value investors have been able to make up for underperforming value strategies by taking the plunge into momentum investing for part of their portfolios, writes John Reese, CEO of Validea.com. In order to pull this off, investors steeped in the discipline of evaluating a company’s books have to take a couple of mental leaps. Momentum investing is about watching charts, not analyzing financial measures such as book value or earnings growth. In its most basic form, momentum investing means buying stocks that are beating their index over a 12-month period and selling those that are lagging. Here are three stocks that currently score highly on a momentum model we built at Validea.

Read more: Selling the sizzle: Are high-tech veggie burgers the start of a huge new industry, or a fake-beef bubble?

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Investors who minimized bonds in their portfolio have outsmarted themselves

A year ago, bonds and bond funds were for losers, Rob Carrick writes. The 12 months ended May 31, 2019, offer a view on how this seemingly savvy bit of portfolio tinkering can backfire. With bond yields falling hard, the price of bonds and bond exchange-traded funds has been rising (prices and yields move in opposite directions). As a result, the FTSE Canada Universe Bond Index was up 7 per cent on a total return basis for the 12 months through May 31. Even more impressive is the FTSE Canada Long Term Bond Index, up 10.2 per cent for the same period. Out of the blue, bonds have become one of the strongest asset classes this year.

More from Rob Carrick: Bank of Nova Scotia serves up credit cards that save travellers money

CIBC economist Tal on the ugly outlook for bonds and why dividend stocks are the place to be as ‘very difficult year’ looms

Benjamin Tal

Tijana Martin/The Globe and Mail

Escalating trade tensions and concerns about the magnitude of a global economic slowdown have caused bonds to rally and stocks to stumble in recent weeks, leading investors to wonder whether the bull market in equities may be close to an end. The Globe and Mail recently spoke with Benjamin Tal, deputy chief economist at CIBC World Markets, on whether he thinks we’re heading for a recession, how the U.S.-China trade dispute will play out, his outlook on interest rates and more.

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The grass isn’t always greener. How tax and living costs compare in eight Canadian and U.S. cities

Will you always be better off living and working in the United States than Canada? Tim Cestnick compares the tax and living costs in four Canadian and four U.S. cities to see how they stack up. Let’s assume that you’re able to earn $100,000 annually regardless of where you live. In each case, you’ll be earning and spending in the local currency. The table shows the amount of tax that you can expect to pay in various cities. If you were to live in Toronto, you can expect to hand 27.8 per cent of your earnings to the taxman in 2019. If you were to live in Orlando, Fla., on the other hand, you’d pay an effective tax rate of 22.9 per cent, an improvement over Toronto by 4.9 percentage points (there’s no state income tax in Florida).

Tax and cost of living burdens in cities across North America

Canadian cities use Canadian dollars; U.S. cities use U.S. dollars

CategoryVancouverCalgaryTorontoMontrealLos AngelesPhoenixNew YorkOrlando
Income (A)$100,000$100,000$100,000$100,000$100,000$100,000$100,000$100,000
Federal tax$16,330$16,330$16,330$13,927$15,247$15,247$15,247$15,247
Provincial / State / Local tax$6,722$8,063$7,883$15,719$6,144$3,411$5,618$0
CPP / QPP / Social Security$2,749$2,749$2,749$2,991$6,200$6,200$6,200$6,200
EI / Medicare$860$860$860$860$1,450$1,450$1,450$1,450
Total Taxes (B)$26,661$28,002$27,822$33,497$29,041$26,308$28,515$22,897
Effective tax rate26.7%28.0%27.8%33.5%29.0%26.3%28.5%22.9%
Disposable income (C = A - B)$73,339$71,998$72,178$66,503$70,959$73,692$71,485$77,103
Cost of living factor*1.00590.887610.78111.17160.97041.44970.8817
Relative purchasing power (C/D)72,90981,11572,17885,14060,56675,94049,31087,448

Source: Our Family Office Inc.

* Cost of living factors come from www.expatistan.com, a crowdsourced dataset of living costs around the world

Here’s a quick test to see how fee savvy you are as an ETF investor

Can you tell the difference between the management fee for an exchange-traded fund and the management expense ratio? The essence of ETF goodness is low fees - vastly lower than mutual funds, Rob Carrick writes. But it’s easy to get confused about ETF fees because of the way some companies disclose them on their websites. The management fee is what you pay the manager or issuer of an ETF for the work it does in managing and administering the fund. Take the management fee and add in a few extra costs, notably GST or HST, and you end up with the management expense ratio, or MER.

There’s a third fee to be aware of with ETFs, and mutual funds for that matter. It’s the trading expense ratio, or TER, which is an accounting of the costs a fund incurs in buying and selling securities. TERs can be more of a factor in ETFs that use active stock picking.

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More from Rob Carrick: This is what scares people when choosing a financial adviser

What investors need to know for the week ahead

In the week ahead, eyes will be on the U.S. Federal Reserve Wednesday as it makes its latest announcement, with many expecting the central bank to leave interest rates unchanged. Also, Prime Minister Justin Trudeau travels to Washington to meet with U.S. President Donald Trump on Thursday, to discuss trade, among other topics. Economic data on tap include: Canada’s MLS Home Price Index for May (Monday); Canadian manufacturing sales and orders for April, plus U.S. housing starts and building permits for May (Tuesday); Canadian inflation figures for May (Wednesday); Canadian retail sales for April and U.S. existing home sales for May (Friday). Companies releasing financial results include BlackBerry, Canopy Growth and Oracle.

Looking for more financial ideas and opinions?

Frontera Energy to be added to TSX Composite, four other stocks to be removed

Can an insurance company do banking better? Manulife takes a stab at it

Canada’s next recession will be much more severe than in the U.S.

Value-investing students’ top stock picks favour Graham approach over Buffett tack

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Is Indigo another candidate to go private?

A dividend stock with 10 buy calls that has jumped 600% over the past decade

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