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Top Reasons To Invest In Mutual Funds

Are mutual funds a good investment for you? In this episode I give you the top two reasons that mutual funds should be on your radar!

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My approach to investing is straightforward. I study the markets, global economies and what’s happening within industries to be in a position to best help my clients find good quality investments that will help them meet their goals. I build custom portfolios for each client. I welcome you to call me at 416-332-3863 or email me at This email address is being protected from spambots. You need JavaScript enabled to view it..

Year End Wrap Up 2018

Year End Wrap Up 2018 B

2018 has been one heck of a ride for investors, with the first part of the year taking us to ever greater heights only to see the fall plunge us back to ground zero wiping out double digit gains. In fact, this year’s big swings in the stock market are at their highest level since 2011.

So what happened?

Technology stocks soared and then plummeted taking the markets with them

Technology stocks have been market leaders over the past few years, which has led to markets becoming more narrow. Until September of this year, only about a handful of technology stocks--Amazon, Apple, Google, Netflix--were responsible for the strength of the markets and the all-time highs they reached. What we’ve since learned is that tech carried the market even though many stocks in different sectors were trading in correction or bear territory. The only reason the U.S. markets aren’t down lower today is because of the gains generated by tech stocks in the first part of the year. People knew the tech run would end at some point. We just didn’t know how or when. Now we do. On the flipside, tech is now over-sold. Don’t be surprised if in the not so distant future, these stocks return to the upside.

Tariffs and tradewars

In March1, when President Trump first announced the first round of tariffs on goods coming in from China, triggering a trade war and escalating tit-for-tat tariffs between the two nations, investors were initially lulled into a false sense of security because the markets were still going up. The impact took a few months to show itself, but it has and the markets are feeling it. By November, the majority of CEOs were talking about the negative impact of tariffs and input costs2 with analysts during their third-quarter corporate earnings calls. Prices are going up, inflation is rising, companies are scouting new locations to drive down costs. However, counter to what President Trump had hoped, they aren’t leaving China to set up shop in the U.S. They are looking to places such as Thailand. Bottom line: no one wins in a trade war--especially not investors.

NAFTA becomes USMCA the Canada-United States-Mexico Agreement

Maybe the only thing that any of the three nations gained from the new agreement is certainty, or at least as much certainty as is possible in these uncertain times. For Canada, we avoided a protracted fight with our largest trading partner that would have cost us future business investment into the country from abroad. Did anyone really win? I don’t think so.

The oil saga continues

Oil prices fell off a cliff from about $70 a barrel to about $50 and Canadians are worried, for good reason: oil has long been the backbone of our currency. At one point, the oil sector accounted for about 25% of our stock market. Now, it’s closer to 20% . But who benefits from high oil prices other than oil companies and their suppliers? Higher oil prices just increase prices for businesses that then pass those costs on to consumers. I think low oil prices are a good thing and we should get used to it and adjust because technology has made it more accessible than ever. Think about it, thanks to hydraulic fracturing, the U.S. is now one of the world’s biggest oil producers. Oil is everywhere and low prices are here to stay. As an investor, I largely stay away from oil stocks unless they pay a healthy dividend.

Cannabis stocks went crazy high before being sold off

The story of cannabis stocks is almost exactly the same as that of tech stocks in 1998/1999. I remember in the days of the tech boom getting calls from people saying, “Allan my buddy told me to buy anything.com.” My reaction was, “Who the heck is anything.com? What do they do? They are going to leave the market just as quick as they entered.” Twenty years later, it’s cannabis stocks which got a big boost from legalization in Canada and the hope on the part of investors that these companies are going to get major investment from other sectors. For example, there was talk that Coca Cola might be developing cannabis infused beverages. The reason they fell is because it’s simply too soon to tell if that will happen. Just as with the tech sector in the late 1990s, there will be winners and losers but it’s too early to see who those will be. Share price is not going to grow based on recreational use. It will be the companies that partner with and get investment from other sectors that will last and grow into their market valuations. My best advice is to wait and see how the market evolves. That said, for those investors who really want to buy in, I recommend sticking with the big three: Canopy Growth Corp., Aurora Cannabis Inc., and Aphria Inc.

Gold is out, the U.S. dollar is in

This was another interesting development in 2018. Typically, when there is market volatility and geopolitical unrest, investors flock to gold, something solid, for stability. This is no longer the case. Instead, global investors are buying the U.S. dollar and Treasury bonds. Despite all the chaos in the oval office, the U.S. still has the world’s strongest currency and no one is challenging this dominance.

Mueller, the midterms and the Donald effect

The Mueller Investigation into the Russian government’s interference in the 2016 U.S. presidential election continues to make headlines but so far has had no bearing on the stock market, largely because many people believe President Trump will not be impeached or removed from office. Investors are more focused on what is happening, which is the trade war with China. The midterm elections, on the other hand, did affect the markets because something did change: the House of Representatives is now controlled by the Democrats. Come January, President Trump will have to answer to these newly elected officials who have already announced they want to see his tax returns. This will ramp up political and market volatility. Sitting Presidents always impact the markets but we’ve never seen the likes of what’s happening in Washington right now and it’s because of President Trump, his 3 am tweets, combative nature and unpredictability.

So that's 2018. Buckle up for 2019. Happy New Year!

Call Me or Email Me
My approach to investing is straightforward. I study the markets, global economies and what’s happening within industries to be in a position to best help my clients find good quality investments that will help them meet their goals. I build custom portfolios for each client. I welcome you to call me at 416-332-3863 or email me at This email address is being protected from spambots. You need JavaScript enabled to view it..

References

  1. ROUND 2: US, China announce newest round of tariffs as Trump's trade war shows no sign of slowing down, Business Insider
  2. Here are the 2 main issues CEOs are complaining about on earnings calls, Yahoo Finance

Market Bounce-Back Often Occurs When You Least Expect It

Market Bounce Back B

First things first: we’re all in this together. If there is comfort and safety in numbers, across the board, pretty much everyone’s portfolio has taken a hit as stocks have wiped out their gains for the year. But things aren’t as bad as you might think.

Yes, growth seems to be slowing and we appear to be in the late innings of the longest bull market in modern history--and that’s OK. There are reasons to be cautiously optimistic:

  • We are not in a recession nor do I think we’re entering a recession. We may see lower than expected GDP for Canada and the U.S. but that’s still growth. The market seems to be pricing in economic chaos and the worst case scenario down the road, but I don’t believe we are anywhere near that because the fundamentals are still sound. The biggest immediate signal that all is well: The U.S. Federal Reserve is expected to raise interest rates. It wouldn’t do this if the economy was headed into recession.
  • Geopolitical unrest and 3 am tweets from the U.S. president are behind much of the market volatility. These are not economic indicators. Corporations are still reporting solid earnings. Retailers, in particular, are reporting strong numbers. The data shows that people have a lot of money and they’re spending it. The housing market in Canada may have slowed but it’s not falling off a cliff.
  • We are in an environment where anything can happen, including a market bounce-back. Donald Trump can issue a tweet announcing a trade deal with China and the markets can open 300 points higher just like that.
  • Statistics show that some of the worst markets are followed by some of the best. It makes sense because over time everything reverts back to the mean. We know the S&P 500 averages an 8% rate of return. A couple of years ago, it made 20%. This year it will make zero.  The average is now down to 10%. When you’re over-sold, you know a bounce is coming, when you’re over-bought, you know a sell-off is coming. That’s just the way stock markets work.

Personally, I am optimistic because once we filter out the noise, we are going to go back to focusing on the fundamentals of companies and the fundamentals and their prospects for growth are good. Once the market starts pricing good back into the equation, stock prices will go higher. This market has become extremely cheap. We are over-sold and I think the things that are pulling the market down are short-term in nature and will be resolved, hopefully, soon.

My best advice to investors: Stay the course and adjust your portfolio to reflect the current environment. For example, it’s understandable to want to be defensive when markets drop, so you may want to buy more conservative, less volatile stocks such as utilities or telecoms that have proven to weather market volatility well.

I do not recommend leaving the market and then trying to find the right time to buy back in. That is a bad strategy because it’s impossible to time the market. Getting out is easy. Getting back in at a beneficial time is a lot harder. Instead, stay invested and be there for when the market rises--because we know it will.

Call Me or Email Me
My approach to investing is straightforward. I study the markets, global economies and what’s happening within industries to be in a position to best help my clients find good quality investments that will help them meet their goals. I build custom portfolios for each client. I welcome you to call me at 416-332-3863 or email me at This email address is being protected from spambots. You need JavaScript enabled to view it..

Relax. The Best Times Often Follow The Worst!

Relax TheBestTimes B

Is your head spinning? You’re not alone. It’s been a tumultuous six weeks for the markets, with U.S. gains for the year wiped out1 on November 20. Tech stocks, which make up a good chunk of Wall Street’s main indexes the Dow Jones Industrial Average and the NASDAQ, felt the brunt of investors’ anxieties as they contemplate the potential fallout of trade tensions between the U.S. and China, slowing growth and rising interest rates. The pessimism crossed over into Europe and the Chinese markets of Shanghai and Shenzhen, too.

This is the world we live in and things can change on a dime--as they appeared to after two key announcements. On November 28, Federal Reserve Chair Jerome Powell gave a speech that many took to indicate interest rate increases may taper off, which sent markets soaring.2 Three days later, after a highly anticipated dinner between U.S. President Donald Trump and Chinese President Xi Jinping following the G20 meeting on November 30, the two agreed to stop imposing new tariffs--at least temporarily--setting the stage for a potential year-end market rally. 

While this is good news, it’s important to understand the backdrop and a few new wrinkles that are making market uncertainty the new normal: slowing growth met with rising interest rates and the rise of ETFs. Let’s start with a little economics. Typically, central banks raise interest rates to slow the momentum of a too-fast growing economy and to mitigate inflationary pressures. In this case, I believe, the central banks are raising rates because of the fallout of tariffs that is already boosting prices. So costs are higher but there is no accompanying growth.

At the same time, markets are dealing with the rise of Exchange Traded Funds, which typically track a stock index and shares trade just like common stocks. So if a sell off of technology stocks is happening within an ETF, the whole fund dips, impacting the values of other stocks it holds beyond the confines of the fund. Everything is inter-related and it’s scary.

So what do investors do? Take a step back and look closely at your portfolio. Those investments you were considering a few months ago are probably cheaper today. As an advisor and investor myself, I’ve been re-allocating money to investments that were maybe too expensive before but are now affordable and can work in this current environment of uncertainty.

I’m not alone. Central banks and mutual fund money managers across the board are taking another look at their strategies. Individual investors should do the same. Revisit your holdings to make sure they make sense with what’s happening in the world especially with respect to trade.

My best advice: Stay in the market. Move your money around. Go shopping for deals where it makes sense. Look into stocks that pay dividends. We know, based on 60 years of historical data, more than 50% of an investor’s returns come from dividends. Consider the numbers. If you can earn a 5% dividend and then a 5% return on your investment, then you have an opportunity to make an overall 10% rate of return. This drop in the market is not different. We’ve been through 1999, 2008, 2011 and one of the key lessons learned is that the best times often come after the worst. Those investors who stayed in the markets and bought during those dips came out ahead. So relax and adjust. Even people who are entering retirement still have time to ride this current wave. 

Call Me or Email Me
My approach to investing is straightforward. I study the markets, global economies and what’s happening within industries to be in a position to best help my clients find good quality investments that will help them meet their goals. I build custom portfolios for each client. I welcome you to call me at 416-332-3863 or email me at This email address is being protected from spambots. You need JavaScript enabled to view it..

References

  1. Stocks Fall, Wiping Out Gains for 2018, The New York Times
  2. Stocks Leap as Fed Chief Hints Interest Rate Increases May Taper Off, Voice of America News

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