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Welcome to the top of the mountaintop for returns on guaranteed investment certificates. We won’t stay there long, if a growing number of indicators are correct in suggesting interest rates have stabilized and will head lower next year.

You could still get 6 per cent rates on one- and two-year GICs as of late this week from Motive Financial and Oaken Financial, and rates of as much as 5.7 per cent were available from a variety of issuers for terms of three to five years. Big bank specials offered this week included 5 per cent returns for various terms, including five years. GIC investors, it’s unlikely you’ll see any better than these. If you’re thinking about putting money in GICs, act now.

The real question is when rates on GICs start to edge lower. In the past several weeks, the financial market interest rates that guide returns for guaranteed investment certificates have fallen hard. Five-year GICs are influenced by five-year Government Canada bonds, which have seen a decline in their yields lately to a tick below 3.6 per cent from 4.4 per cent in October. That’s a huge drop in bond-market terms, but GIC rates have barely reacted.

Bond yields fell in the spring on the expectation that inflation was tamed, and this in turn led to a steep drop in GIC returns. Inflation worries surged in the ensuing months, catapulting GIC rates higher again. A resurgence by inflation can’t be 100 per cent ruled out, but it appears highly unlikely.

The inflation rate itself has started to pull back, and economic growth is stalling. The Bank of Canada has an opportunity to adjust its overnight rate next week and it’s expected to do nothing, thereby validating the view that rates have peaked. Economists expect rate cuts by the bank as soon as next spring.

GICs aren’t the complete answer to your investing needs, but they do offer a way to secure an inflation-beating return for a slice of your portfolio with virtually zero risk as a result of deposit insurance. Expect stocks to outperform in the long term, though with much drama along the way.

Also, keep in mind that there’s reinvestment risk with GICs. Today’s one- or two-year GIC in the 5 to 6 per cent rate will very likely pay out less when renewal time comes.

-- Rob Carrick, personal finance columnist

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Stocks to ponder

Bank of Nova Scotia (BNS-T) Over the past five years, Scotiabank’s share price has declined by more than 10 per cent, not including dividends, making it the only big bank stock that is down over this period. The strategy of buying a bank stock that is trailing its peers has an intriguing long-term record of outperformance, as laggards tend to bounce back. But as David Berman tells us, Scotiabank hasn’t delivered the rebound investors have been hoping for.

Aura Minerals Inc. (ORA-T) Year-to-date, Aura’s share price is up 23 per cent, making it the 44th best performing stock out of 247 securities in the S&P/TSX SmallCap Index. The stock has a unanimous buy recommendation from five analysts. The average one-year target price implies the share price has 57 per cent upside potential over the next 12 months. Jennifer Dowty takes a closer look at this dividend-paying gold and copper producer.

The Rundown

Market pushback on central banks’ rates view just got louder

A big disconnect between financial markets and central banks has just got deeper, with traders ramping up their bets on interest rate cuts in the United States, Canada and Europe as evidence grows that inflationary pressures are fast abating. And those rate cut hopes are buoying stocks ahead of an uncertain 2024.

Nvidia, Apple and using valuation as a gut check

Nvidia Corp. reported its results recently and the numbers were eye-popping. Revenue for the third quarter was up 206 per cent to US$18-billion, and earnings per share were up more than 12 times, year-over-year. So, what did the stock do? Well, it went down. As Tom Bradley tells us, the stock’s reaction reinforced one of investing’s core principles: valuation matters.

Big tech stocks such as Amazon and Apple are delivering big gains. But for profit growth, is real estate a better bet?

A handful of big tech stocks have delivered outsized gains in 2023, but David Berman reports that some savvy investors are looking for opportunities among far less popular stocks that promise equal or better profit growth.

The past month gives investors reason to hope for a small-cap resurgence

In an era of financial markets monopolized by trillion-dollar tech stocks, it can be easy to forget the small-cap space even exists. But it’s still there, waiting for the moment when the infatuation with immensity eases, and the favour of the market shifts back to the little guy. As Tim Shufelt reports, several big-name market commentators in recent weeks have argued that that moment is already upon us.

Global pension funds now balking at China

Tactical traders desperate to retain a presence in the giant Chinese economy and hungry for “cheap” valuations in a relatively expensive global marketplace continue to tout its attractions and predict turning points. But as Reuters’ Mike Dolan reports, the exit of longer-term investors from the country paints a far more worrying picture and suggests deeper-seated concerns.

Fed starting gun for US$6-trillion dash from cash

As the Federal Reserve’s policy ‘pivot’ draws into view, investors face a US$6-trillion question – where to deploy this record amount of cash if the beefy interest rate returns drawing people there evaporate again? Earning short-term rates not seen for well over a decade, the attraction of 5 per cent cash is considerable and raises a high bar for other assets to perform in such an uncertain economic environment, as Reuters’ Jamie McGeever reports.

Forget forecasting – here’s how investors can prosper in a turbulent market

While it is nearly impossible to forecast the macro economy, timing the stock market is even more difficult. Without the ability to forecast accurately, can investors do anything to enhance their returns? Portfolio managers Jason Del Vicario and Steven Chen have some ideas.

Others (for subscribers)

John Heinzl’s model dividend growth portfolio as of Nov. 30, 2023

The highest-yielding stocks on the TSX, plus risk data

Number Cruncher: U.S. dividend growth screen uncovers strength in the energy sector

Crypto stocks set to start December on high note as bitcoin hits near 19-month high

Friday’s analyst upgrades and downgrades

Thursday’s analyst upgrades and downgrades

Thursday’s Insider Report: CPP Investments cashes out more than $450 million from this industrial stock

Monica Rizk: Bullish on Alamos Gold Inc.

Globe Advisor

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What’s up in the days ahead

John Heinzl has a reality check on the “Santa Claus rally” we keep hearing about every year around this time.

That most wonderful time of the year: World market themes for the week ahead

Click here to see the Globe Investor earnings and economic news calendar.

More Globe Investor coverage

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Compiled by Globe Investor Staff

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