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Top Links: Sell-off in bonds, dividend stocks intensifies

A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the Web

Global markets are treating the U.S. President-elect Donald Trump's $1-trillion infrastructure as a fait accompli, and I believe this sets us up for a correction in sectors like industrial metals. Mr. Trump will have a shocking amount of power to unilaterally change trade policy, but Congress still holds the purse strings determining fiscal spending. The Republicans control both the House and Senate but the Tea Party, for one, are likely to fight higher deficits tooth and nail.

"Don't Underestimate What Trump Could Do [on trade]" – Peterson Institute
"Conservatives vs. Trump's infrastructure plan" – Politico
"Worst Week for Bonds Since 2013 Seen Overstating Trump Policies" – Bloomberg

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The sell-off in global bond markets accelerated overnight with the U.S. 30-year Treasury bond yield rising over 3 per cent. Canadian bond markets are not immune. The five-year government of Canada yield – yes, the one that drives mortgage rates – popped above one per cent this morning after starting last week with a yield of 70 basis points.

The threat of rising bond yields to domestic dividend and distribution-paying equity sectors has been clearly apparent in the past week. Since Monday, real estate stocks are lower by 2.7 per cent, telecoms are lower by 2.8 per cent and consumer staples are down 3.3 per cent.

I'm not convinced, yet, that yields will keep rising and income stocks keep falling. It is important, however, to remember that no investor born after 1960 has seen a sustained bear market in bonds and very negative effects this has on dividend stocks. A multi-year market environment of climbing yields would be so unfamiliar that I'm worried that investor, and me, won't take it seriously until it's too late.

" 'Trump Thump' whacks bond market for $1 trillion loss" – Reuters
"U.S. Two-Year Yield Tops 1% as Pimco Says Rates May Be Bottoming" – Bloomberg
"@SBarlow_ROB TSX Sector returns from last Tuesday " – (includes chart) Twitter
"6 % 10 Year?" – Barrons, Across the Curve
"How 'Trumpflation' could ripple through Canada's housing market" – Babad, Report on Business
"Dividend stocks dominate list of oversold TSX constituents" – Barlow, Inside the Market

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Crude prices are lower on details regarding the continuing supply glut,

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"Output at the fields west of the Karoun River, near Iran's border with Iraq, rose to about 250,000 barrels per day from 65,000 barrels in 2013 … Iran had expected to reach that output target by the end of the year."

"Iran Pumps More Oil as Saudi Minister Calls for OPEC Output Cuts" – Bloomberg
"Oil Man Who Foresaw Crash Sees OPEC Uniting in Self-Interest" – Bloomberg
"U.S. shale firms go back to work buoyed by OPEC deal, Trump victory" – Reuters

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The CRTC, under the Harper government, announced that "cord cutting" by Canadian consumer – cancelling cable programming – would force them to consider new regulations limiting Canadians' access to over the top services like Netflix. This, despite the fact that I personally will be apoplectic, might happen sooner than later as CBC is reporting record numbers of Canadians cancelling cable tv,

"Canadians continued to cut the cord in record numbers following the launch of the CRTC-mandated basic TV plans on March 1. This is according to Mario Mota, with Boon Dog Professional Services, an Ottawa-based research and consulting firm. Mota crunched subscriber numbers for Canada's seven major publicly traded TV providers, including Bell, Rogers, Telus and Shaw. He found they lost a combined total of 98,476 TV customers in their first two fiscal quarters during the period of March through September. That's a loss of 13 per cent more customers than the same period in 2015."

"$25 basic TV can't stop customers from cutting their cable in record numbers" – CBC

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Tweet of the Day: "@JP_RGMP Bond market playing catch-up after a day off. Sell anything priced with a % sign. " – Twitter

Diversion: Fredrik DeBoer is a (very) left-leaning academic and writer who has nonetheless been extremely critical of U.S. liberals' ability to spread their message. It's not that part I found interesting in the story below (the previous was more of a content warning – there's also some adult language), it was Mr. DeBoer's warning to media,

"if people didn't listen to your reporting about Trump, if you couldn't motivate voters to change despite his mountains of disqualifying baggage, it's because no one likes you… until you change your culture from the insular, self-aggrandizing book club that treats looking at other parts of the country as an anthropology exercise, all of the scandals and investigative reporting and damning policy analysis will mean nothing because nobody will be listening to you."

"they're going to keep losing" – DeBoer

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About the Author
Market Strategist

Scott Barlow is The Globe's in-house market strategist. He is a 20-year veteran of Canadian investment banks, including Merrill Lynch Canada, CIBC Wood Gundy and Macquarie Private Wealth (MPW). He was a highly ranked mutual fund analyst for 10 years and then, most recently, the head of a financial adviser support team at MPW. More

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