Looking for investing ideas? Here’s your weekly digest of the Globe’s latest insights and analysis from the pros, stock tips, portfolio strategies plus what investors need to know for the week ahead.
Investors who like their ETFs simple and cheap have some new choices for covering the Canadian market
The uncontested benchmark for the Canadian stock market is the S&P/TSX Composite Index, but as Rob Carrick writes, a growing number of exchange-traded funds and index funds are following a different path.
To save money, they’re tracking new or lower profile benchmarks such as the Solactive Canada Broad Market and FTSE Canada indexes. Big considerations in choosing ETFs are fees and popularity (as measured by trading volumes and assets). But the underlying index matters, too. You want an index that is well diversified in both stocks and sectors. One of the latest ETF players to look beyond the S&P/TSX Composite Index is TD Asset Management, which is part of Toronto-Dominion Bank.
How negative interest rates offer an opportunity for investors in bank stocks
Falling bond yields can be bad for bank stocks, especially if a recession is brewing. How should investors navigate through the current warnings coming from the bond market? Canadian and U.S. bank stocks are down from recent highs earlier this year, reflecting trade tensions, economic uncertainty and a remarkable decline in government bond yields.
David Berman writes that the stakes are particularly high for bank stocks, which are economically sensitive and can see their lending margins crushed when rates fall.
How RBC’s head of global fixed income is navigating the bond market in today’s low interest rate environment
“We tend to invest in a countercyclical way. We increase our risk when compensation is generous and decrease when value is negligible,” said Dagmara Fijalkowski, senior portfolio manager and head of global fixed income and currencies at RBC Global Asset Management, when asked to describe her investing style. “We hedge our currency exposure in order to reduce the volatility of the fund by protecting against changes in currency exchange rates. We take currency risk only when we expect appreciation of currencies versus the Canadian dollar.”
Brenda Bouw also asked Ms. Fijalkowski about how she is preparing for a possible recession and how investors should best navigate the bond market.
Related: How to invest in this period of both risk and uncertainty
Forget recession. The real challenge for investors now is slow growth
A growing number of people are beginning to think about what was once considered unthinkable – the prospect of zero, or even negative, interest rates in the world’s largest economy.
Alan Greenspan, the former chairman of the U.S. Federal Reserve, said last week it is only a matter of time before the sub-zero rates in Europe and Japan spread to the United States. Jamie Dimon, chief executive of JPMorgan Chase & Co., the biggest U.S. bank, told an investment conference on Tuesday his company is already analyzing how to deal with zero interest rates, on the remote chance they do arrive.
What should investors make of this chatter? Ian McGugan writes that if zero rates, or negative rates, do come to pass, the big winners would be bondholders, since the price of bonds goes up as rates fall.
More from Ian McGugan: How a negative-rate environment could do more harm than good
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Not all rate-reset preferred shares get hammered by falling interest rates
The most common type of preferred share is developing a reputation for being a liability when interest rates are falling.
Don’t entirely write off rate-reset preferreds in a falling rate world, though. As Rob Carrick writes, a small slice of the rate-reset market offers a minimum dividend, a sweetener that helps these shares weather rate declines better than other rate-reset shares.
Related: Rate-reset preferred shares having their day, but could turn nasty again
What investors need to know for the week ahead
In the week ahead, the U.S. Fed will begin meeting Tuesday and make an announcement Wednesday at 2 p.m. ET about economic predictions, followed by chair Jerome Powell’s press briefing.
Economic data on tap this week include Canada’s existing home sales and average prices for August (Monday), Canadian manufacturing sales for July (Tuesday), Canada’s ADP Employment for August (Thursday) and Canada’s retail sales for June (Friday).
Companies reporting their latest earnings include Fedex and Supreme Cannabis (Tuesday), General Mills (Wednesday) and Darden Restaurants (Thursday).
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