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The Canadian and U.S. stock markets reached record highs in 2019, but a lot of investors were spectators.

If we judge by what’s been selling in the fast-growing world of exchange-traded funds (ETFs), investors have been very much focused on bonds, dividend-paying defensive sectors such as utilities and low-volatility stocks.

When the herd does something in investing, it’s tempting to try to find fault. We can easily do that with the conservative investing trend of the first half of 2019. After stocks fell last year, the obvious smart thing to do was to buy ETFs tracking the major stock indexes and wait for the usual slingshot effect.

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But the weird state of affairs in financial markets means conservative investors didn’t do too badly in the first half, and they may be positioned well for what comes in the rest of 2019 and into next year.

The big story in the $181-billion ETF sector in Canada in the first half was a massive inflow of money into bond funds. According to National Bank Financial, the flow of investor dollars into ETFs holding government and/or corporate bonds was double the amount going into equity funds.

It’s a mark of how unusual conditions are in financial markets that investors made out pretty well with bonds in the first half, although not as well as those who bought stocks when they were cheap. The benchmark FTSE Canada Universe Bond Index produced a total return of 6.5 per cent from January through June, while the S&P/TSX Composite Index made 16.2 per cent. Total returns include index changes up or down plus either bond interest or dividends.

Other popular choices in the first half include ETFs holding low-volatility stocks, which move up and down in price less violently than the broader market. In general, they have delivered returns as good or better than broader market indexesin Canada.

The concept of diversification in investing – there’s nothing more fundamental – is based on the reasonable expectation that different types of assets rise or fall in price at different times. Today, we have multiple sectors doing well: The major stock indexes, low-volatility stocks and bonds.

Low interest rates are what tie all of this together. They help bonds thrive, and defensive sectors such as utilities and real estate that play a big part in low-volatility ETFs. Low rates fuel the broader stock market because they’re seen as friendly to growth in economic output and corporate profits.

Read the rest of Rob Carrick’s column (for subscribers).

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Stocks to ponder

Evertz Technologies Ltd. (ET-T). This dividend stock appears on the positive breakouts list. Year-to-date, the share price is up over 13 per cent. However, long-term investors with a buy-and-hold strategy have not been rewarded with significant gains as the stock price has been locked in a trading band for many years. Looking back over the past five years, the share price has largely traded between $15 and $19, and the stock price is currently nearing the upper end of this trading band. Fundamentally, the company has delivered revenue growth over the years, reporting record revenue in fiscal 2019. The company has a solid balance sheet with over $1.40 per share of cash and marketable securities. Furthermore, the stock has an attractive, stable dividend with a current yield of 3.9 per cent. Burlington, Ont.-based Evertz Technologies Ltd. designs, manufactures and sells video and audio equipment to the telecom and television broadcast industries. Jennifer Dowty reports (for subscribers).

The Rundown

Beware the disconnect between equity markets and growth

It’s fortunate that equity markets have the support of loosening financial conditions because the global economic growth backdrop is deteriorating in a hurry, threatening corporate profit growth and asset prices. Equity markets and economic growth signals have been going in decidedly different directions in recent weeks. The S&P 500 is hitting new highs despite a planet-wide torrent of weak economic data and declining bond yields suggesting reduced expectations for future growth. Scott Barlow looks at the charts for insights (for subscribers).

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A skeptic’s look at Wall Street’s record highs

As Wall Street hits new highs, investors should take a close look at the underpinnings of the stock market boom. Consider, for instance, a downbeat but intriguing take from Jesse Livermore, a pseudonymous blogger with a wide following in the U.S. financial community. In a research paper for O’Shaughnessy Asset Management, he argues corporate profits in the United States have been systematically overstated for decades. According to his forecasts, annual returns over the next decade for U.S. stocks will be underwhelming, although not as devastating as some bears predict. Ian McGugan reports on what this all means (for subscribers).

Three attractively priced stocks that may help pave way to a dividend-enabled retirement

Lounging on the beach in the summer sun can inspire dreams of a dividend-enabled retirement. The idea of being able to support oneself with dividend income, while not having to dip into capital, can be quite appealing. While dividend stocks pay the way for many retirees, they aren’t without risk. But those with the right dividend policies are better positioned to survive downturns. Norman Rothery takes a look at three dividend-paying stocks worth a look (for subscribers).

Four stocks that would score highly with the investing greats

Some people have all the luck. They win the lottery or find a $10 bill in the pocket of a pair of pants they haven’t worn since last winter. They invest in a stock just as it takes off. They put seemingly no effort into their success. Investors should remember that they can’t count on being lucky. This temptation is hard to avoid. Most people with any experience in the stock market know there’s no sure-fire way to beat it in the short term, but there are always one or two investors who make winning look easy. They grab the headlines, and everyone else is left to wonder where they went wrong. John Reese takes a look at four stocks that are good investments, not lucky ones.

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Trade uncertainty, gloomy outlook weigh on Canadian IPO market

Trade uncertainty and a gloomy economic outlook prompted many Canadian companies to delay their public market debuts, opting instead for cash infusions from private-equity investors. The U.S. market for initial public offerings (IPOs) has been strong, driven partly by a number of large, high-profile technology firms – including Slack Technologies Inc., Uber Technologies Inc. and Pinterest Inc. – that have chosen to go public this year. Canada’s capital markets, in contrast, have been quiet for the first half of the year, with only six IPOs raising $599.1-million, according to the latest data from Refinitiv. That’s down from the first half of 2018, another slow year, when seven IPOs raised $972-million. Refinitiv’s figures do not include offerings smaller than $5-million. Alexandra Posadzki reports (for subscribers).

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

The S&P/TSX Composite enjoyed a strong trading week to Thursday’s close, climbing 1.8 per cent to stand 17.7 per cent higher for the year. In technical terms, the benchmark’s Relative Strength Index (RSI) reading of 63 leaves it in neutral territory, although much closer to the overbought RSI sell signal of 70 than the oversold buy signal of 30. There are four technically attractive, oversold index members according to RSI this week. Gran Tierra Energy Inc. is the most oversold company in the benchmark, followed by Maple Leaf Foods Inc., NuVista Energy Ltd., and Blackberry Ltd. Scott Barlow reports (for subscribers).

Low drama stocks are acing it in both up and down markets

Whether the stock markets go up or down, conservative stocks are king. One of the more surprising investing success stories of the past five years is how low volatility stocks have consistently trounced the broader market. Low vol investing is supposed to be about sacrificing the highest highs for stocks in order to miss the worst of market plunges. But the net effect for investors has been steady outperformance with low vol. Heard that you have to take on more risk to get better returns? The low vol story has defied that wisdom. Rob Carrick explains (for subscribers).

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Others (for subscribers)

Investors should buy the upcoming market dip: Citi

‘Market melt-up’ is now base case scenario: strategist

Ten U.S. tech stocks with strong growth and performance

Hunting for reasonably priced Canadian stocks with good growth potential

Friday’s Insider Report: CEOs are buying these two stocks

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Friday’s analyst upgrades and downgrades

Friday’s small-cap stocks to watch

Thursday’s Insider Report: Bruce Linton pockets a multi-million dollar profit from Canopy

Thursday’s analyst upgrades and downgrades

Thursday’s small-cap stocks to watch

Others (for everyone)

‘Markets make mistakes’: Why bonds may have overreacted on inflation

U.S. interest rates just keep falling. Economic orthodoxy is falling with them

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Compiled by Gillian Livingston

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