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
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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)
NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.
Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.
“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”
Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.
Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.
Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.
Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.
In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.
The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.
And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
