Some income-focused investors may be wondering whether dividend aristocrats ETFs are suitable in portfolios amid high inflation and interest rates.BRENDAN MCDERMID/Reuters
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Advisors’ role has expanded greatly in the past couple of decades to focus more on financial planning and holistic wealth management services. Nevertheless, investing is still a critical component of the overall service offering.
After all, clients go to their advisors, first and foremost, to get help on managing their finances and investment portfolios. So, if advisors lack even the most basic insights into the themes and trends shaping the investment landscape, clients are sure to lack faith in their abilities on a variety of other tasks.
Here are 10 articles on investing themes and strategies published in the past year that are worth a second read:
Canada’s Big Three telecommunications companies have plenty of appeal as investors look for safety in a challenging environment. Rogers Communication Inc. RCI-B-T, BCE Inc. BCE-T and Telus Corp. T-regularlyT are all recession-resistant with high demand for their utility-like services. Customers need cellphone plans, internet connections and access to streaming services in all seasons. BCE and Telus pay high dividends, which are rising regularly. And while all three compete with one other, high barriers to entry mean it’s tough for new players to get a foothold.
As market participants look for other places to invest besides technology stocks, energy is one of the sectors getting some attention. The price of oil has been climbing, which should help boost producers’ profitability. Furthermore, the dividends most of the companies in the sector pay are attractive to many investors. “Despite more than a year of recessionary fears, the demand for oil today is at its highest point in history,” says Eric Nuttall, partner and senior portfolio manager at Ninepoint Partners LP in Toronto.
Copper is taking on a new shine as a critical metal in the clean energy transition. Although resource experts are upbeat on the price of the coveted commodity over the medium-to-longer term, some miners are now takeover targets as merger and acquisition activity heats up. “The environment is ripe for higher copper prices given demand shocks from the energy transition,” says Jon Case, portfolio manager and research lead for metals and materials at CI Global Asset Management.
Baby boomers represent about 25 per cent of Canada’s population, and baby boomer households hold an average of $1.2-million in net worth, accounting for about 50 per cent of the country’s wealth, according to Statistics Canada. So, while millennial spending habits often make headlines, investors might be better off paying attention to the needs and wants of the aging boomer population.
Dividend reinvestment plans (DRIPs) make a lot of sense for investors if they don’t need cash dividends to live on. The purchases are free of fees and the compounding effect adds up. Coreen Sol, senior portfolio manager at CIBC Wood Gundy in Vancouver, says the purchases have more of an impact in a weak market. The shares are acquired at a depressed price, so the long-term benefit is magnified as conditions improve. “I would recommend a DRIP if it’s an investment that you’re holding for a long period of time,” she says.
Private mortgage investments are high-yield assets likely to attract more attention from those seeking to diversify portfolio holdings, even as real estate faces an uncertain future in the near term. “Mortgage investments have historically provided a stable income stream to investors with low volatility and can offer enhanced returns compared with other fixed-income options,” says Simon Carlsen, senior director and head of mortgage investments at Nicola Wealth Management Ltd. in Vancouver.
Some income-focused investors may be wondering whether dividend aristocrats exchange-traded funds (ETFs) are suitable in portfolios amid high inflation and interest rates. In Canada, dividend aristocrats ETFs hold qualified companies that are listed on the Toronto Stock Exchange, have increased their annual dividend for the past five years, and have a market capitalization of a minimum of $300-million.
Direct indexing may not be accessible in Canada but its tax benefits have some industry watchers examining the possibilities. On a direct indexing platform, if a client wants to own a particular benchmark, the client would hold individual securities instead of purchasing units of an ETF or mutual fund, says Manmeet Bhatia, president and chief executive officer of Fiduciary Trust Canada, part of Franklin Templeton, in Vancouver. “The systematic tax management opportunities available through direct indexing versus pooled investments represent a key advantage for private wealth portfolios.”
A pilot underway in Ontario to broaden the criteria of who qualifies as an accredited investor is being welcomed by advisors as the next step in the “modernization” of the private investment space – and an opportunity to broaden their client base. Still, some industry experts caution advisors to tread carefully with the interim investment rules and ensure clients aren’t risking too much of their capital.
It has been a stunning year for the so-called “magnificent seven” stocks that have powered the U.S. stock market. Specifically, they have gained 101 per cent so far this year, according to the Bloomberg Magnificent 7 Total Return Index. In contrast, the S&P 500 Total Return Index is up 21 per cent. “I think you will see some moderation [in gains] next year,” says Peter Hofstra, senior vice president and co-head of equities at Toronto-based CI Global Asset Management. “We hold six of the seven names and believe they will be a source of positive returns next year.”
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets climbed to their best week of the year.
“It’s been almost a complete opposite or retracement of what we saw last week,” said Philip Petursson, chief investment strategist at IG Wealth Management.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
While last week saw a “healthy” pullback on weaker economic data, this week investors appeared to be buying the dip and hoping the central bank “comes to the rescue,” said Petursson.
Next week, the U.S. Federal Reserve is widely expected to cut its key interest rate for the first time in several years after it significantly hiked it to fight inflation.
But the magnitude of that first cut has been the subject of debate, and the market appears split on whether the cut will be a quarter of a percentage point or a larger half-point reduction.
Petursson thinks it’s clear the smaller cut is coming. Economic data recently hasn’t been great, but it hasn’t been that bad either, he said — and inflation may have come down significantly, but it’s not defeated just yet.
“I think they’re going to be very steady,” he said, with one small cut at each of their three decisions scheduled for the rest of 2024, and more into 2025.
“I don’t think there’s a sense of urgency on the part of the Fed that they have to do something immediately.
A larger cut could also send the wrong message to the markets, added Petursson: that the Fed made a mistake in waiting this long to cut, or that it’s seeing concerning signs in the economy.
It would also be “counter to what they’ve signaled,” he said.
More important than the cut — other than the new tone it sets — will be what Fed chair Jerome Powell has to say, according to Petursson.
“That’s going to be more important than the size of the cut itself,” he said.
In Canada, where the central bank has already cut three times, Petursson expects two more before the year is through.
“Here, the labour situation is worse than what we see in the United States,” he said.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
