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 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.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
