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While the pandemic has demonstrated the importance of having money safely parked in a savings account, it has also driven savings rates into the ground.

Interest rates have done some funny things since the pandemic hit hard. Central banks drove their benchmark rates down, and the major banks followed along with their prime rates, used to price home-equity lines of credit and variable-rate mortgages. Bond yields fell then started to rise and then eased back again. Savings accounts have basically gone one way – down.

While this trend applies to big banks, alternative online banks and credit unions alike, the extent of the decline differs a lot. Pay attention if you sensibly want to build up savings to see you through tough times ahead.

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Data gathered by the consulting firm McVay and Associates show that big banks have cut their rates since February by an average 0.65 of a percentage point, bringing the average return on a high rate savings account to 0.38 per cent.

The average rate from alternative banks fell by 0.64 of a point, leaving the average return at a much better 1.44 per cent. Credit unions cut their savings account rates the least on average – by 0.6 of a point. But the average return was just 0.76 per cent, well behind alternative banks.

Alternative banks are your best bet for top rates on savings, then. The good news for safety seekers: Many of them are covered by Canada Deposit Insurance Corp., which means eligible deposits of up to $100,000 in principal and interest are covered. Worried about CDIC’s stability in these uncertain times? In a recent column, I explained why you should have confidence in this federally backed agency.

It’s an open question whether alternative banks can maintain rates at current levels, which means around 2 per cent at best. On one hand, these banks need to be aggressive in attracting deposits they can lend out to other customers. On the other, the weak economy is like a lead weight pressing down on interest rates. There is a much bigger likelihood that rates go lower before they turn around and head back to pre-pandemic levels.

Here are the alternative banks listed in the McVay report as having rates at or above 2 per cent at the time of publishing: B2B Bank, LBC Digital, Motive Financial, EQ Bank, Oaken Financial, Alterna Bank (down to 1.9 per cent as of Thursday) and Peoples Trust.

-- Rob Carrick

This is the Globe Investor newsletter, published three times each week. If someone has forwarded this e-mail newsletter to you or you’re reading this on the web, you can sign up for the newsletter and others on our newsletter signup page.

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Stocks to ponder

Rogers Communications Inc. Falling profits, dashed expectations and withdrawn forward guidance might look like the perfect triple-whammy of bad news for a company’s investors. But when the source of the bad news is Rogers Communications Inc., investors might want to take a closer look at the opportunity instead. The reason: Although the telecom giant is wrestling with the economic fallout from the novel coronavirus pandemic, it looks like a clear survivor – and the stock can still be bought at a substantial discount to its pre-pandemic levels. David Berman tells us more (for subscribers)

The Rundown

Pandemic? What pandemic? One of the world’s leading growth investors embraces the positive

At Baillie Gifford, a 112-year-old investing partnership in Edinburgh, the short-term outlook doesn’t matter all that much – not even at times like the present, when the short term involves a global plague and the worst economic downturn in decades. The important question is still what a prospective investment will look like in five to 10 years. Baillie Gifford has carved out a niche searching for those rare outperformers. It is one of the world’s leading growth investors, managing or advising on US$290-billion in assets for investors around the world. Ian McGugan spoke with one of its investment managers for insight on how its portfolio is positioned for the future. (for subscribers)

The world will look much different once the pandemic ends. These investments will thrive in it

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What the world looks like when the crisis ends is truly anyone’s guess, but economist David Rosenberg says with 100-per-cent clarity that it is going to look a lot different than it did before. Months of isolation and distancing and fear of a return of the pandemic are going to fundamentally alter lifestyles and will have a profound influence not just on the way we live but how we conduct ourselves in our business and commercial lives. And that means certain investments are going to do very well - while others are heading for big trouble. David takes a look at some of them. (for subscribers)

A concentrated or a diversified portfolio – what strategy is best for you?

With global equity markets materially above their March lows and now trading relatively sideways, it’s a good time for investors to begin thinking about rebalancing and strategically repositioning their portfolios. The Globe’s equity analyst, Jennifer Dowty, shares her insight on how to do just that. (for subscribers)

Investors were slow to see coronavirus’s global spread. Are they again too complacent about the economic risks?

In the days immediately before the COVID-19 pandemic slammed into the global economy, investors were calmly pushing North American stocks to record highs. In hindsight, that level of complacency in mid-February seems difficult to reconcile with the outbreak, considering the ravages already inflicted on China’s society and industry, combined with the fact that the virus had spread around the world. Now, after a blistering rally over the past month from the lows of March, are markets repeating the same mistake? Tim Shufelt takes a closer look (for subscribers)

Four key things to know when building a value investing strategy amid the COVID-19 crisis

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Value investing always involves buying companies with problems. It always involves dealing with the uncertainty that the future will look different than the past. That level of uncertainty can vary significantly over time and it is probably close to an all-time high right now. Jack Forehand of Validea outlines some important things to keep in mind when building a value strategy at a time like this. (for everyone)

Others (for subscribers)

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

Friday’s analyst upgrades and downgrades

Thursday’s analyst upgrades and downgrades

Thursday’s Insider Report: Two executives cash out millions from this consumer stock

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Number Cruncher: Ten U.S. health care stocks leading the pack in 2020

Number Cruncher: Ten sustainable funds that have fared well during the pandemic crisis

Others (for everyone)

The growing worry for bondholders: Getting ‘primed’

Extreme volatility raises questions over WTI

Big Oil investors to look past earnings pain and focus on dividends

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As oil slumps, investors reinforce short commodity currency bet

What’s up in the days ahead

Tim Shufelt takes a look at what’s driving the latest rally in Shopify shares to all-time highs.

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

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You may also be interested in our Market Update or Carrick on Money newsletters. Explore them on our newsletter signup page.

Compiled by Globe Investor Staff

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