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Add another voice to the chorus advising investors to cool it on their expectations for future gains.

“Over the next decade, we believe that investors should prepare for lower annual portfolio returns,” TD Economics said in a recent report. TD’s view of the future sounds a lot like the one found in financial assumptions produced for Canadian financial planners to use in their projections for clients. The common thread is diminished expectations.

But that’s to come. For now, let’s consider just how well the markets have performed and then assess how well our portfolios have captured these gains. Given how fixated Canadians are on the housing market, it’s possible people have missed the news about how strong stocks and bonds have been for the long-term investors who held through the past 10 years.

Here’s a quick market scorecard: The FTSE Canada Universe Bond Index averaged 4.5 per cent annually over the 10 years to June 30, while the S&P/TSX composite index averaged 7.8 per cent and the S&P 500 averaged 13.6 per cent in U.S. dollars. All figures are total returns, which means bonds interest or dividends plus changes in bond or stock prices.

Both stocks and bonds are kicking butt lately, which is unusual. Then again, unusual developments have become usual in the 10 years since the global financial status quo was smashed in a combination recession and stock market meltdown. For the first six month of this year, bonds delivered a total return of 6.5 per cent and Canadian stocks soared 16 per cent.

Let’s turn it over to TD Economics to explain why this won’t last. TD says that with central banks expected to maintain rates around current levels, bond market gains will be more subdued in the years ahead. Bonds are at their best when rates are falling.

On stocks, TD says the Canadian and U.S. markets are projected to return 4 to 7 per cent on an average annual basis as global economic growth slows. One small bit of positive news is that cash returns are expected to be somewhat higher than they were in the past decade.

Backing up TD’s view is the most recent set of return projections from the FP Canada Standards Council, which oversees the certified financial planner (CFP) designation in Canada. I wrote about these projects not too long ago to quickly recap, a balanced portfolio with a cash/bonds/stocks weighting of 5/45/50 is projected to produce an average annual 3.74 per cent over the long term, after fees estimated at 1.25 per cent.

Both houses and the stock and bond market have had a pretty great decade. It’s quite possible all these assets take a breather in the years ahead.

– Rob Carrick, Globe personal finance columnist

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The Rundown

How the Sahm indicator can predict a U.S. recession

The U.S. jobs numbers that were published Friday offer a quick, relatively simple way to get a reading on the health of the world’s largest economy – especially if you view them through an intriguing new filter. The filter is known as the Sahm recession indicator after its creator, Claudia Sahm, an economist at the Federal Reserve. She found that one of the surest and fastest ways to know whether the United States is in a recession – or headed toward one – is to look at changes in the unemployment rate. Even apparently small shifts can have large implications for the economic outlook. Ian McGugan explains (for subscribers).

The week’s most oversold and overbought stocks on the TSX

The S&P/TSX Composite fell back 0.6 per cent for the trading week ending with Thursday’s close, and the year-to-date total return is now 16.4 per cent. In terms of technical analysis, Relative Strength Index (RSI) puts the benchmark as a whole in the neutral range with a reading of 42 that is between the oversold RSI buy signal of 30 and the overbought sell signal of 70. Scott Barlow finds 20 oversold, technically attractive index companies according to RSI this week, and the list is dominated by resource stocks. (For subscribers).

Average Canadian household spent more on taxes than living costs in 2018, report finds

The average Canadian household paid nearly $40,000 in taxes last year, more than the combined cost of clothing, food and shelter, according to a new report. The Fraser Institute’s annual Canadian Consumer Tax Index is meant to show how the tax bill has changed over time. Last year’s average tax burden of $39,299 is almost three times what Canadians paid in 1961, after adjusting for inflation – and has risen much faster than the cost of necessities, including housing, the institute said. Tim Shufelt reports.

Others (for subscribers)

‘Global cash cows:’ Citi’s top stock picks

Fed disappoints, investors confronted with weakening fundamentals - and don’t like what they see

Check out these 15 U.S. stocks for value, momentum and quality

These 15 TSX stocks combine value, momentum and quality

Fed, trade confusion upending Wall Street investment playbooks

Trade war whiplash and other market themes for the week ahead

Disney report to shine spotlight on streaming war

Friday’s Insider Report: CEO tops up his investment in this stock yielding 5%

Friday’s analyst upgrades and downgrades

Friday’s small-cap stocks to watch

Thursday’s analyst upgrades and downgrades

Thursday’s small-cap stocks to watch

Others (for everyone)

Dead or alive: When is the right time to transfer wealth?

Yield Hog: John Heinzl’s model dividend growth portfolio as of July 31, 2019

Globe Advisor

‘Engagement’ is necessary for advisors to maintain client loyalty

Sedate government bonds offer protection with significant upside

Are you a financial advisor? Register to Globe Advisor (www.globeadvisor.com) for free daily and weekly newsletters, in-depth industry coverage and analysis, and access to ProStation – a powerful tool to help you manage your clients’ portfolios.

Ask Globe Investor

Question: I hold 1,200 class A shares of Bombardier Inc. that I want to sell. The shares are thinly traded and I want to avoid selling bits and pieces and incurring additional commissions. I wanted to enter an “all or none” order but my broker said this is not an option. What do you suggest?

Answer: The Toronto Stock Exchange eliminated all or none orders (where a trade must be executed in its entirety or not at all) a decade ago, but you should still be able to sell your Bombardier shares with only one commission. Over the past three months, the class A shares (which carry 10 votes each, compared with one vote for the more widely held B shares) traded an average of more than 70,000 shares a day. That’s about 1 per cent of the class B volume, but it should still provide ample liquidity to exit your position. Another sign of a liquid stock is a narrow spread between the “bid” (the maximum price buyers are willing to pay) and the “ask” (the minimum price sellers will accept). BBD.A’s spread is often just a penny – the same spread as the largest, most liquid stocks on the TSX.

There are a couple of ways to execute the sale. The simplest is to enter a “market order," which will dispose of all of your shares at the best available price. With some low-volume stocks, it’s not unusual for a sale to be executed in stages – with a few hundred shares sold at one price, a few hundred more at perhaps a slightly different price, and so on. That’s because, as trades are executed, the bid and ask prices may change. But the process is very quick and, even if your broker sells your position in pieces, you will only be charged one commission.

Another option is to enter a “limit order” that specifies the minimum price you will accept. There is less certainty with a limit order, however. Depending on the price you set, you could sell all, some or none of your shares. What’s more, you could end up paying more than one commission if, for example, you sell half of your shares one day and the other half the next day. In most cases, however, if you sell all of your shares on the same day, only one commission will apply. Make sure you understand your broker’s policies before entering your order.

If I were in your shoes, I would probably choose a market order as it’s the easiest method and, given the stock’s adequate liquidity, you’ll probably get a price that’s close to the last trade. If you check the bid and ask prices before you enter the order, this should give you a pretty good idea of the price you’ll get. Some brokers also offer “level 2” quotes, which show you all of the buy and sell orders on the books. This will give you an even clearer picture of the price you’ll receive and will help you time your order so it’s most advantageous to you.

–John Heinzl

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Compiled by Gillian Livingston

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