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.
Why now is not the time for major portfolio changes
I have not created a new portfolio and don’t plan to, John Heinzl writes in response to a reader. The securities in my model portfolio are all strong businesses that I am confident will survive the current economic situation and continue to prosper in the years ahead.
I have, however, been reducing the portfolio’s risk by reinvesting dividends into stocks that I believe offer the highest degree of safety and potential for dividend growth in this highly uncertain environment. In May, for example, I increased my position in two largely regulated utilities – Fortis and Emera). Many of the other holdings – including Algonquin Power & Utilities, Brookfield Infrastructure Partners and Capital Power – will also likely continue to raise dividends, according to analysts.
More from John Heinzl: Yield Hog model dividend growth portfolio as of May 31, 2020
2% is a great return right now, so stop trying to do better with your cash
The pandemic has turned a 2-per-cent return from an online savings account into a financial coup, Rob Carrick writes. There is no better cash option for the everyday person. You get inflation-beating returns with no risk and full liquidity in that you can get your money any time. In fact, 2 per cent is so good it probably won’t last long. Stop looking for better and grab it up while you can.
Investors who want to keep cash close at hand in their investment account, check out this column comparing safe parking spots such as money market funds, savings account mutual funds and exchange-traded funds.
More from Rob Carrick: How the COVID-19 pandemic will affect the financial advice business
Bank stocks are stirring. Can the rally keep going?
After lagging the market during the recent rebound, bank stocks are now catching up with big gains of their own, David Berman writes. What will it take to keep the rally going? Royal Bank of Canada, for example, has rallied more than 16 per cent since May 26, when the big banks began to report their second-quarter financial results. That has easily beaten roughly 5-per-cent gain by the TSX over the same period.
The attractive aspect here is that most bank stocks have a lot of room to rise before they fully recover. And let’s not forget about those big dividends: The average yield is about 5 per cent. But, clearly, any bet on bank stocks rests on a number of optimistic assumptions about the economy – and the banks’ exposure to it. Loan losses are key here.
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Four reasons to be cautious about this market rebound
Global stock markets are in an ecstatic mood, Ian McGugan writes. Their consistent message is that history’s briefest depression is receding fast. But there is still a lot we don’t know about what comes next. Investors should consider four threats that could darken the market’s carefree mood over the months ahead.
One threat is the possibility that the economic recovery won’t be quite so rapid as markets are assuming, perhaps because of renewed viral outbreaks, perhaps because of other factors such as increased consumer caution and other ripple effects from lockdowns. Expectations for the rebound are now so high that it would not take much of a shortfall to disappoint them. Here is a closer look at this and the three other threats.
More from Ian McGugan: Investors are due for a reality check: Upheaval often foreshadows deeper economic challenges
Vindicated: Boring old portfolio of stocks and bonds has done sterling work in 2020
Never, never, never judge the thinking that went into your investment portfolio at the worst point in a stock market plunge, Rob Carrick writes. Unless you hold cash or guaranteed investment certificates, your portfolio almost certainly looked like dog food in early April.
Investing results to May 31 offer vindication to all well-diversified investors who thought they somehow blew it because their portfolio was so badly mauled in the worst of the pandemic-driven stock market crash. As a proxy for the generic balanced portfolio, here’s a look at a pair of balanced exchange-traded funds.
What investors need to know for the week ahead
In the week ahead, the U.S. Federal Reserve makes its latest interest rate announcement on Wednesday. Observers will be watching for hints that the central bank believes the worst part of the coronavirus crisis has passed. Economic data on tap include: Canadian housing starts for May (Monday); U.S. wholesale inventories for April (Tuesday); U.S. inflation numbers for May (Wednesday); U.S. producer price index for May (Thursday); Canada’s new motor vehicle sales for March and April, Canada’s industrial product price index and raw materials price index, as well as U.S. import prices for May (Friday).
Companies reporting their latest financial results include Dollarama, Transcontinental, Lululemon, Transat and Roots
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