Ridley Scott released the original Blade Runner in 1982 with the movie set in 2019. Now it’s actually 2019 and, while Mr. Scott’s depiction of the future did successfully predict giant digital billboards, Facetime and voice commands for computers, flying cars and replicants are nowhere to be seen.
Stanley Kubrick’s 2001: A Space Odyssey, made in 1968, is another example of a movie that saw a much different future coming a lot faster than it did. This tendency is so common in books and movies that Wikipedia has a giant “List of stories set in a future now past” page displaying the ‘sorry, you’re going to have to wait a few more decades’ phenomenon more than a hundred times.
Investors are also prone to this kind of impatience for a payoff dependent on a future that is more distant that it appears. The Boomernomics investing trend of the late 1990s – based on an aging population – fizzled out painfully when investors realized the related profits would only occur beyond their investment time horizons.
I’m honestly not sure about the extent to which the shift to electric vehicles will apply to this trend of investor impatience. The early 20th century switch from horses to cars happened remarkably fast after Henry Ford made the Model T affordable to the masses in 1908. The same pace of change could happen in the next few years with internal combustion engines playing the role of horses.
Volkswagen AG is looking to play the Ford role for electric vehicles, announcing its intentions to make EVs available for as little as US$23,000. The Financial Times published estimates earlier this week that 2018 would represent peak sales of fossil fuel powered cars for all time.
Even if the FT’s prediction turns out accurate, this doesn’t necessarily mean that now is the time to invest in electric vehicle-related assets, and this includes commodities like lithium and cobalt that are used in their manufacturing.
A complete changeover to EVs could, for example, take two decades – this would be considered a revolution in historical terms – with the bulk of the investor returns still years away. It’s also important to remember that in the 1910s there were hundreds of U.S auto manufacturers but by the end of the 1920s so many had failed or been acquired that the Big Three were more or less all that was left.
Science fiction movies teach us that technological advancement only appears imminent. It takes time, often a lot of time. From an investor perspective, it’s likely a better plan to ignore the hype and wait until actual, sustainable profit growth at reasonable stock valuations is apparent. That way they’ll be prepared no matter what the unknowable future brings.
-- Scott Barlow, Globe and Mail market strategist
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Stocks to ponder
Rogers Communications Inc. (RCI-B-T). Very few stocks are on the positive breakouts list (stocks with positive momentum) given the recent market weakness. However, several weeks ago, Rogers climbed to an all-time high. During the fourth quarter market meltdown, this stock held its value with its share price rallying 5 per cent, while the S&P/TSX Composite Index tumbled 11 per cent. In 2019, this stock may return to the positive breakouts list with its share price less than 3 per cent away from its record closing high. Jennifer Dowty reports (for subscribers).
Canadian Apartment Properties REIT (CAR.UN-T). This real estate investment trust (REIT) appeared on the negative breakouts list (stocks with negative price momentum) at the end of December. The unit price has declined nearly 9 per cent over the past four weeks. This recent price weakness may represent an investment opportunity. The unit price is currently hovering just above its 200-day moving average, which has proven to be a significant level of support that has not been breached over the past two years. Earlier this month, two analysts upgraded the REIT to ‘buy’ recommendations. Canadian Apartment Properties REIT, commonly referred to as CAPREIT, is a residential landlord owning over 51,500 units located primarily in and close to major cities across Canada as well as in the Netherlands. Jennifer Dowty reports (for subscribers).
Sell! No, wait, buy! Here’s how to navigate the conflicting signals sending markets into a tizzy
You can tell two compelling stories about today’s stock market. Both are quite persuasive. Unfortunately, they completely disagree. The bullish story focuses on robust economic readings, such as the strong jobs numbers reported on Friday in Canada and the United States. Given such obvious signs of vitality, bulls argue that stocks are fairly valued, if not downright cheap, after the brutal declines they have experienced over the past couple of months. In contrast, the bearish narrative points to the general trend toward slower economic growth, and concludes that Wall Street is living in a fool’s paradise. According to this line of thinking, share prices are doomed to continue dropping as corporate earnings fall back into line with historical trends. Which story is more correct? Stock markets can’t decide. Ian McGugan reports (for subscribers).
From hold more cash, to this is ‘the greatest time' ever to invest in the TSX, three top pros offer advice for volatile markets
In recent months, stocks have been hammered with equity markets repeatedly experiencing a string of triple-digit losses. The S&P/TSX Composite Index posted a loss of 11 per cent in the final quarter of 2018, the worst performing quarter since 2008 when the Canadian economy was officially in a recession. The S&P/TSX is now trading at levels last seen in 2016 and at a forward price-to-earnings multiple of about 13 times the consensus 2019 estimate – a level not seen since 2012. Is the stock market now close to a bottom or is there a further downside? How should investors position their portfolios in the current environment? Jennifer Dowty interviewed three industry pundits who outlined their market outlooks, which may help investors navigate potential market volatility in 2019 (for subscribers).
Back to work after the holidays, keep an eye on the S&P 500’s ‘5-Day Rule’
The holidays are over, New Year resolutions have been made and broken, and traders, investors and money managers are putting their annual investment plans into practice. How will 2019 pan out? No one knows for sure, certainly not this early in proceedings, but there are rules of thumb around the month of January that can offer clues as to what lies ahead. The S&P 500’s so-called “5-Day Rule” holds that if the market rises in the first five trading sessions of the year, it will end the year higher. Broadening that out, if the S&P 500 ends January in the green it will end the year in the green too. Jamie McGeever from Reuters reports (for subscribers).
ETF sales set to outpace traditional mutual funds for first time in a decade
Canadian investors and financial advisers are shifting away from traditional mutual funds as they pour more money into exchange-traded funds, with ETFs set to outpace mutual funds sales for the first time in a decade. With $18.7-billion in net sales, ETFs in the first 11 months of 2018 heavily outsold mutual fund investments, according to data provided by Strategic Insight. Mutual funds produced the lowest sales total in more than a decade, at $7.8-billion. Clare O’Hara reports (for subscribers).
Drop in fixed-term mortgage rates is imminent, experts say
Falling bond yields should push fixed-rate mortgage costs lower in the near-term, possibly as early as this week, mortgage industry experts predict. Yields on five-year Government of Canada bonds – which help determine the price of fixed-rate mortgages – have fallen sharply since November, dropping from a recent high of 2.46 per cent on Nov. 8 to 1.86 per cent as of Monday, a decline of more than half a percentage point. Prices particularly started to dip in late December, hitting a recent low of 1.752 per cent by Jan. 3. Janet McFarland reports (for subscribers).
Canaccord Genuity reveals its top Canadian stock picks for 2019
Believing the world economy is starting 2019 with “waning momentum,” equity analysts at Canaccord Genuity feel a slowdown in growth is likely to continue through the first half of the year, expecting to see leading economic indicators to remain “depressed.” The firm expects investors to continue to take a defensive equity posture through the first quarter and possibly into the second quarter as global growth deceleration hits the United States. Under that climate, they feel utilities, staples, energy and health care will outperform, while, at the same time, consumer discretionary and technology will struggle. David Leeder reports (for subscribers).
Pot stocks have their highs and lows: How Canadian IPOs fared in 2018
Pot stocks provided investors with wild swings and either big wins or losses in 2018, depending on what you bought, and when. The IPO market was no exception. The two best-performing Canadian initial public offerings of the past year were cannabis companies. And two of the three worst-performing IPOs came from the sector, as well. To get a sense of how the IPO stocks performed, Globe Investor focused on 18 IPOs from Canadian exchanges and examined whether they outperformed the broader market, as measured by the performance of the S&P/TSX composite over the period from their debut to the end of 2017. The Globe also looks at returns both from the offering price – which the ordinary retail investor often can’t get in on – and from the closing price on the first day of trading. David Milstead reports (for subscribers).
Three trends that will affect Canadian investors in 2019
Over the last few years, Canadian markets have evolved in significant ways. We have more products to choose from, new ways to create portfolios and better access to once hard-to-find investments. Yet, we still lag behind the United States in important areas – although likely not for long. Over the next 12 months, three big trends will emerge that will not just affect Canadian markets, but also the way people construct portfolios and invest for their futures. These trends will allow Canadian investors to create more diversified, pension plan-like portfolios that can withstand expected market volatility. Here’s what investors should be paying attention to in 2019. Barry McInerney, President and CEO of Mackenzie Investments, explains.
Is it time to put your investments in neutral?
It’s hard to find any area of the financial markets not swept up in the recent whirlwind of volatility, and that has more established investors looking at a controversial strategy aimed at isolating performance from the broader market mayhem. It’s called market-neutral investing, in which returns are targeted with no regard for movements or general trends in the stock or bond markets. Most investment advisers can initiate a market-neutral strategy to certain degrees. Some money managers employ market-neutral strategies only on a client-by-client basis or through market-neutral hedge funds. Among the strategies used are holding long and short positions simultaneously, or buying fixed-income vehicles, or using technical analysis or algorithms. Dale Jackson reports (for subscribers).
Answers to the most confounding quiz questions
John Heinzl loves tripping up investors with his annual year-end quiz. (If you missed it, you can find it here.) But he’s also happy to hand out the answers and the reasoning behind them.
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What’s up in the days ahead
Now that Barrick Gold Corp. has completed its merger with Randgold Resources Ltd., the combined company is going to have to navigate two thorny issues that are likely keeping many investors on the sidelines. Is a bigger gold producer a better gold producer? And does Barrick’s shift toward Africa-based mines raise the geopolitical risks for a company that used to be defined by its relatively stable locales? David Berman will look at the investment case for the bulked up Barrick.
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Compiled by Gillian Livingston