The longest column I’ve written during my six-year tenure in this industry, tentatively titled "10 things I think I think about global markets’ will be printed this weekend. There’s always a degree of randomness in lists like these but the majority of the discussion surrounds answering the most important question for investors, “How long will these rallies last?”
The 10 topics include the most important chart for Canadian investors (retail sales versus housing prices), commodity price weakness caused by slowing global manufacturing activity, the future of the loonie, the negative market effects of central bank monetary tightening, and domestic bank stocks.
A lot of the charts that accompany the column, notably an extremely dire example from Citi, have negative implications for investors. This worries me, but not for obvious reasons.
Marketwatch published the ‘Chart of Shame’ earlier this week, which cruelly calls out the disaster-predicting permabears over the past decade, noting, “One thing they all have in common: Complete wrongness.” As a result, I’m concerned that I haven’t been bullish enough in the column even if there’s no suggestion of ‘run for your lives, the bear market is here!”
There is always something for investors to worry about. NAFTA negotiations is a recent example and fretting about high household debt levels and the housing market has become a national cottage industry.
‘The market always climbs a wall of worry’ is a well-worn market cliché that addresses this issue but financial professionals have another saying that fits a bit better in my opinion, “the bear case always sounds smarter.”
There is something psychological about investor attraction to apocalyptic pundit predictions, likely because they give voice to our internal anxieties about big portfolio losses, and thus sound more intelligent and true. Equity markets, however, have many more positive years of performance than negative.
Globe and Mail subscribers can decide for themselves whether I’ve picked the right 10 ‘things’ in a few days. Constructive feedback is always welcome.
-- Scott Barlow, Globe and Mail market strategist
This is the Globe Investor newsletter, published three times each week. If someone has forwarded this e-mail newsletter to you, you can sign up for Globe Investor and all Globe newsletters here.
Stocks to ponder
Quebecor Inc. (QBR.B-T). This company’s share price has fallen nearly 8 per cent over the past two weeks. As a result, the stock is close to appearing on the negative breakouts list (stocks with negative price momentum). This recent selloff may represent a buying opportunity for long-term investors. Analysts anticipate the share price will rally 20 per cent over the next year. Quebec-based Quebecor Inc. is a telecommunications and media company. Quebecor has three key business segments: telecommunications; the media segment, with the television broadcaster, TVA Group; and its smallest segment, sports and entertainment. Jennifer Dowty reports (for subscribers).
The Rundown
The long, dark night for GIC investors and savers has finally come to an end
A small but encouraging rate war is being fought over five-year GICs. EQ Bank is offering 3.52 per cent on a guaranteed investment certificate with a five-year term, just surpassing the 3.5 per cent offered by Oaken Financial. Several other small independent banks are offering rates in the 3.1-per-cent to 3.3-per-cent range, while the big online bank Tangerine offers 3 per cent. Expect more battling over the months ahead on rates for both GICs and savings accounts. Rob Carrick explains what’s happening.
How your helpful bank will ace you out of a good GIC renewal rate
Convenience has its cost, GIC investors. If you deal with a big bank, you may get a renewal notice when your guaranteed investment certificates come due. It basically sets out the amount of principal you have, the maturity date of your existing GIC and the rate being offer on renewal, which can occur automatically. One Globe reader’s experience shows why you should never accept the proposal renewal rate without first checking to see if you can do better. “My partner and I use different banks, but both have GICs that automatically renew at our request,” this reader said in an e-mail. “Both banks have exploited us by issuing new low interest rate GICs.” Rob Carrick looks at what you can do to fix this (for subscribers).
Investors make big bets on Canadian auto-parts makers as possible NAFTA deal nears
The prospect of a little more certainty in the wildly unpredictable world of global trade has boosted Canada’s auto-parts makers this week, none more so than Linamar Corp., the company most imperilled by Donald Trump. Linamar, Martinrea International Inc. and Magna International have all gained in recent days. The three companies have plants scattered across North America and face serious disruption if the Trump administration follows through with threats to implement tariffs of 20 per cent to 25 per cent on auto parts or new cars. David Milstead reports (for subscribers).
Why John Heinzl is switching from pizza to doughnuts in his dividend growth portfolio
Goodbye pizza. Hello coffee, doughnuts, burgers and fried chicken. Back in May, John Heinzl wrote that he was losing his appetite for Pizza Pizza Royalty Corp.’s (PZA) shares and would be watching the company’s performance closely. Hurt by the proliferation of third-party food delivery apps, growing competition from U.S. pizza chains Domino’s Pizza Inc. and Papa John’s International Inc. and a highly promotional fast-food marketplace, Pizza Pizza had reported a string of weak results and the company’s stock had taken a hit. In light of the company’s deteriorating performance and poor dividend growth prospects, he’s decided to take his lumps and sell the 200 Pizza Pizza shares in his model portfolio. He’s using the proceeds – plus most of the cash in his model portfolio – to purchase 45 shares of Restaurant Brands International Inc. (QSR). The owner of Tim Hortons, Burger King and the Popeyes fried chicken chain not only offers superior diversification, but its dividend has been rising steadily and will almost certainly continue to increase. John Heinzl explains his reasoning (for subscribers).
Why I’m skeptical of the latest Canadian dollar rally: This trade deal is all about America first
David Rosenberg says the loonie may have had a bit of a rally, but he doesn’t trust it due to the frantic rush to make a NAFTA deal by Friday. Once the short squeeze is done and the Canadian dollar performs its technical tests of the moving averages, it likely then will retain a “sell” signal – this is a currency rally you can rent, but not own. (For subscribers).
Top Links (for subscribers)
Trump will pay a price for bullying tactics on trade: U.S. economist
Behold the ‘chart of shame’: S&P 500 vs. everyone who said the market was about to crash
Others (for subscribers)
Thursday’s analyst upgrades and downgrades
Thursday’s Insider Report: CEO unloads nearly $1-million worth of this stock
Wednesday’s analyst upgrades and downgrades
Wednesday’s Insider Report: Companies insiders are buying and selling
Others (for everyone)
Emergence of Canadian unicorns sparks momentum in angel investing
Short bets on world’s biggest tech stocks surge
Melt-up on the mind as U.S. stock gains near euphoric levels
Volatility traders damned either way as February bets washed out
Number Crunchers (for subscribers)
Portfolio focuses on companies with a strong handle on debt
Ask Globe Investor
Economic doomsayers are obsessing over the state of the yield curve. For a better guide to whether a recession lies ahead, they may want to consider a less well-known indicator. Ian McGugan will explain all about it.
Do you have a question for Globe Investor? Send it our way via this form. Questions and answers will be edited for length.
What’s up in the days ahead
Click here to see the Globe Investor earnings and economic news calendar.
More Globe Investor coverage
For more Globe Investor stories, follow us on Twitter @globeinvestor
Click here share your view of our newsletter and give us your suggestions.
Want to subscribe? Click here to sign up or visit The Globe’s newsletter page and scroll down to the Globe Investor Newsletter.
Compiled by Gillian Livingston
Scott Barlow