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The S&P/TSX Composite is higher by 13.6 per cent year to date but only up 1.6 per cent over the past 12 months. The question as to whether equity markets are rallying or just treading water is a matter of perspective.

Recent signs have not been encouraging. U.S. manufacturing data released Tuesday indicated the weakest activity since 2009 and the JP Morgan Global Purchasing Manager Index shows a continued contraction in worldwide activity.

The Chinese economy, hit by U.S. tariffs, has shown signs of stabilization lately but these numbers will become more trustworthy when they’re verified by other economies in the region. This has not yet occurred. South Korea, an important Asian trade and manufacturing hub, reported an alarming 11.7 per cent year over year decline in exports on September 30.

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We’ve been through growth scares before during the post-crisis rally so it’s not necessarily time for investors to panic. U.S. manufacturing activity was declining almost as quickly in December 2015 and global manufacturing was much worse in 2012. An investor that sold stocks at those points would have missed out on a lot of market gains.

The trade dispute between the U.S. and China makes the future course of markets even more opaque. Progress in negotiations is almost impossible to track amidst the posturing and the potential for impeachment proceedings in the U.S., and ongoing mass protests in Hong Kong create even more political complications.

Investors with longer-term time horizons should, of course, just wait things out, adding to high quality holdings on index ETFs when others panic and sell.

For investors closer to retirement it’s tempting to suggest raising the cash component of their portfolio. Morgan Stanley strategist Wanting Lo suggested just that in a report released Wednesday. As a firm, Morgan Stanley is increasingly convinced we are at the end of the market cycle and a bear market is set to begin.

A larger cash position would be less a matter of trying to time the market as it would be a partial insurance policy against steep losses. Investors that plan to raise their cash allocation should do so with the full understanding that they will not receive the entire benefits of any rally that occurs in the future.

The global economic growth that underpins corporate profit growth and commodity prices is verifiably deteriorating and until that trend changes, investors should recognize this when making portfolio changes. The implications are different for investors with different time horizons and risk tolerances, but it makes little sense to ignore what could be a sea change in market conditions.

-- Scott Barlow, Globe and Mail market strategist

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Stocks to ponder

Aecon Group Inc. This is a stock that investors may want to watch and put on their radar screens should further price weakness continue, says our equities analyst Jennifer Dowty. The stock has 10 buy recommendations with an anticipated one-year price return of 40 per cent. However, this anticipated robust return may be pushed out to 2020 as earnings growth is expected to moderate in the second half of this year with challenging year-over-year comparisons.

The Rundown

Charles Schwab’s move to axe online trading fees weighs on TD

Concerns over slowing economic growth, falling interest rates and a trade war between the United States and China have been weighing on Canadian bank stocks for more than a year. Now, investors have something else to consider: tumbling U.S. brokerage fees. David Berman explains

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With value investing making a comeback, this new ETF is worth considering

Tobias Carlisle, a young money manager from Australia, figured out recently that value investing isn’t quite dead. Instead of consigning value investing to the grave, he took the contrarian view and launched a new value-focused exchange traded fund. He called it the Acquirers Fund (ZIG) and listed it on the NYSE in May. The ETF follows a quantitative deep-value approach like those Mr. Carlisle detailed in a series of books. And Norman Rothery thinks investors may want to give it serious consideration.

Two years in, my dividend portfolio is crushing it

It’s been two years since John Heinzl started his model Yield Hog Dividend Growth Portfolio. It’s time for a detailed look at how the portfolio has performed. You could say the results have been rather divi-licious.

Others (for subscribers)

Wednesday’s analyst upgrades and downgrades

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Tuesday’s analyst upgrades and downgrades

Wednesday’s Insider Report: Multiple executives are selling this bank stock

Tuesday’s Insider Report: CEO buys this stock yielding 4.7% as it flirts with a record high

Strategy highlights TSX stocks with a history of steady earnings growth

Others (for everyone)

Why investors aren’t getting true value stocks with value ETFs

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Value ETFs do not meet the value requirements for either value investors or academics, writes professor of finance George Athanassakos. Value investing is all about finding undervalued stocks, and these tend to be stocks that are smaller, with low analyst following, and low P/E and P/B. However, this is not how ETFs are structured, as they need stocks that are larger and with a lot of liquidity. These tend not to be potentially or truly undervalued stocks. And the results bear this out.

Globe Advisor

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Ask Globe Investor

Question: Please suggest some ETFs or conservative stocks that will help to resist to an eventual recession. Is it a good idea to put more of our savings into utilities, telecoms, and infrastructure and real assets? What about REITs? I am retired and just wish to preserve my capital and have some modest capital gains for the next five or 10 years.

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Answer: For starters, let me be very clear. In a recession, all stocks and equity-based funds are vulnerable, even the bluest of the blue chips. It’s a matter of degree.

For example, stocks with an unusually high p/e ratio (some of the tech stocks of companies like Amazon.com Inc.) are more likely to get hit than those with a low p/e. Regulated utilities, like Fortis Inc., would normally suffer less because much of their revenue is guaranteed, and the dividend acts as a floor under the share price.

Apartment REITs would tend to be less exposed to a shrinking economy than office or mall REITs because people always need a place to live. Consumer staples stocks, which have been out of favour recently, also tend to hold up better when the economy tanks.

Bonds are always a safe haven in a recession. For example, in 2008 a portfolio that was divided 60 per cent stocks, 40 per cent bonds would have lost 15.2 per cent, according to an interactive chart on the Steadyhand website. But one that was only 20 per cent in stocks and 80 per cent bonds would have lost only 0.9 per cent.

So, my advice if you are fearful of a recession is to increase your bond holdings and weight your stocks towards utilities, telecoms, apartment REITs, and consumer staples companies like Costco Wholesale Corp.

--Gordon Pape

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

In the wake of online brokers slashing rates to zero in the U.S., can Canada’s banking oligopoly withstand this pricing pressure? David Berman will share some insight.

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

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Compiled by Globe Investor Staff

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