Two prominent members of the global financial community – economist (and ardent Democrat) Paul Krugman and famed corporate raider and active investor Carl Icahn - provided a pointed investment lesson on election night.
In the wee hours of Wednesday morning after the U.S. election result was clear, and Dow Industrials futures were trading lower by 800 points, left-leaning Mr. Krugman wrote,
"It really does now look like President Donald J. Trump, and markets are plunging. When might we expect them to recover? … I guess people want an answer: If the question is when markets will recover, a first-pass answer is never."
Mr. Icahn had a far different, much more profitable evening. Mr. Icahn was attending a Donald Trump victory party when he heard about the extent of the market sell-off. Leaving the party immediately, he reportedly invested $1-billion in U.S. equity futures. Within a few hours he had earned another $10-million – money he's never going to need - as markets recovered.
Strong emotions, positive or negative, are likely to lose you money. I doubt whether the distraught Mr. Krugman was actively trading overnight markets, but if he had it's clear he would have been selling, and lost a lot of money between now and then. The cold-blooded Mr. Icahn used the opportunity caused by other people's emotional response to make himself richer.
There are hundreds of legitimate reasons for emotional responses to this weeks' events. My suggestion is to keep these feelings as far away from your portfolio as possible.
-- Scott Barlow
Three big numbers to note
5.4 per cent The percentage the Dow Jones industrial average was up for the week, it's best showing since 2011.
21 That's the number of pesos to the U.S. dollar, a record low for the Mexican currency. The peso, the world's worst-performing currency this year, took its biggest two-day tumble in more than 20 years following Trump's victory on Tuesday.
80% The latest odds for a December rate hike, based on Fed fund futures. That's up from 78 per cent a week ago.
Stocks to ponder
Rogers Communications Inc. This stock appears on the negative breakouts list. The share price is in a downtrend that remains intact. As this downtrend continues, the stock's valuation is become more interesting, and as such it is a stock to watch, writes Jennifer Dowty. Its price weakness may mark a future buying opportunity. Rogers pays its shareholders a quarterly dividend of 48 cents per share, or $1.92 on a yearly basis. This equates to an annualized dividend yield of 3.6 per cent. Management has maintained its dividend at this level since early 2015, however, it's not as much as its peers. It has nine 'buy' recommendations and 10 have 'hold' recommendations. The average one-year target price is $57.54, implying the shares have 9 per cent upside over the next 12 months.
Molson Coors. We know that Molson Coors Brewing Co. is going to sell a lot more beer, thanks to its newly closed deal to assume control of the MillerCoors joint venture, where it's been a minority investor for a nearly a decade. And that, in turn, will translate into a lot more profit, writes David Milstead. Investors are so enthused about the potential for the combined company they've driven shares to a significant premium to the market as a whole. And the analysts who follow the company are overwhelmingly positive, suggesting there are more gains to come. However, once it takes out all the synergies from the new combination, the issue of the uncertainty about the future of mass-market beer may mean shareholders' returns will go flat soon after.
Cervus Equipment Corp. This stock has been upgraded by two analysts and has eight 'buy' calls, writes Jennifer Dowty. This small cap stock that recently broke out of a multi-year downtrend and appears on the positive breakouts list. Cervus operates dealerships serving the agricultural, transportation, and construction and industrial industries. Cervus pays its shareholders a quarterly dividend of 7 cents per share, or 28 cents yearly. This equates to an annualized dividend yield of 1.9 per cent. The average one-year target price is $15.66, implying the shares have 8 per cent upside potential over the next 12 months.
Power Corp. of Canada. The company's stock price is steadily gaining traction and may display a bullish "Golden Cross" shortly, writes Jennifer Dowty. With respect to the shares of Power Corp., the 50-day moving average is at $28.12, steadily approaching the 200-day moving average, which sits at $28.66. If the recent positive price momentum continues, the stock could experience a bullish "Golden Cross." There are three 'buy' recommendations, seven 'hold' recommendations and the dividend yield is 4.5 per cent.
Russel Metals Inc. This dividend stock became overvalued with the relief rally, writes Jennifer Dowty. With the fast and furious rally for commodity related stocks, valuations may become overextended, and taking some profits off the table may be a prudent move for investors to consider. Russel Metals is one of North America's largest metals distribution companies. The company's three core business segments are steel distributors, metals service centers, and energy products. Its dividend yield is 6.5 per cent, and is trading at a high valuation. It has one 'buy' and six 'hold' recommendations. The average one-year target price is $22.25, implying the shares are fully valued.
The Election-impact Rundown
There are reasons for post-election, short-term loonie optimism
The Canadian dollar was down sharply this week in a "risk off" trade following the shocking U.S. election result, but there are reasons to be hopeful for loonie strength in the short term, writes Scott Barlow. In the mid-term, however, the potential for anti-trade legislation would be all kinds of terrible for the domestic currency. The copper price was sharply higher Wednesday on hopes for a Trump-driven infrastructure program, and this is the primary reason to be optimistic about the loonie in the short term.
Why Donald Trump's win is a boon for Canadian bank investors
Canadian bank stocks have long enthralled investors with big dividends and steady profit growth. Now, the banks also have Donald Trump, writes David Berman. Mr. Trump certainly isn't the U.S. president that most investors had been expecting – or wanting – before Tuesday's election upset. Indeed, global stocks appeared to sell off last week on the mere suggestion that he had a chance of winning the White House. But many observers believe that his victory will have a meaningful impact on bank regulations and loan margins – driving an impressive rally in U.S. bank stocks on Wednesday and giving investors another reason to remain enthusiastic about Canadian banks that have been spending big bucks on U.S. acquisitions.
Why Trump has just put dividend stocks on sale
Stocks that offer stable profits and big dividends are getting pummelled this week, and the selloff looks like a buying opportunity for anyone with a soft spot for ketchup, diapers and WiFi, writes David Berman. Some of the biggest names in consumer staples, utilities and telecom – nearly bulletproof during times of uncertainty – have been hit hard over the past two days, even as the broader stock market rallies toward new highs.
Trump-and-Dump and two other portfolio strategies for the coming era
Canadians weren't able to vote in the U.S. election but they can still register their feelings where it matters most – in their portfolios, writes Ian McGugan. If you're shaken by the prospect of Donald Trump in the Oval Office, you can trim your exposure to U.S. stocks. Alternatively, if you see Mr. Trump as the second coming of Ronald Reagan, you can demonstrate your support by backing some of the sectors that Mr. Trump's policies will favour. There's even a third option: betting on the president-elect to have a market impact but one that will fade quickly. The key here is to get in and out before the downdraft begins. McGugan calls these approaches the Boor Market Strategy, the Stimulator-in-Chief Strategy and the Trump-and-Dump Strategy.
What Trump's victory really means for the markets
David Rosenberg had been saying for some time to sell into any relief rally that would follow a Clinton victory and buy any plunge on the back of a Trump win. In a sign of how quickly markets react to events and then move on, as we saw with Brexit last June, the Dow Jones Industrial Average slumped 700 points in the overnight market, to only then rally back to post a surge of nearly 300 points for the day. An epic 1,000 point swing higher on a day when all we got were words and platitudes — no bailout, no TARP, no TALF, no intermeeting Fed rate cut. Following last June's Brexit vote, the initial selloff was 5 per cent and lasted two days. This selloff lasted about 12 hours and also totaled 5 per cent. Yes, the market was technically oversold going into the vote, but these gyrations and inconsistent behaviours attest to a manic market, he writes.
Goodbye calm. How Trump will affect your personal finances
Hello Donald Trump, goodbye financial calm, writes Rob Carrick. For better or for worse, a victory by Hillary Clinton in the U.S. presidential election would have meant more of the same in economy and financial markets. Mr. Trump's surprise win leads us into four years of uncertainty. We know what he said he'd do – now we wait to see if he follows through. Here are five things you need to know about your personal finances as we head toward a Trump presidency: the loonie is going to be a problem; the stock market is a drama king/queen; your portfolio is fine; interest rates will likely stay low for longer; there's a new way for Canadians to save money -- travel somewhere other than the U.S.
This asset class will thrive in Trump's America
Shifting the despair from Republicans to Democrats created an investment concept. But concepts need to be reified. Until the modern version of Yellow Brick Roads are actually being built, some yellow bricks or shares in gold mining companies are in order, writes Don Coxe.
The rest of the Rundown
These 39 TSX-listed companies pay their dividends in U.S. dollars
Jennifer Dowty finds the TSX companies that pay their dividends in U.S. dollars. That can be helpful to snowbirds who want to earn some income in U.S. dollars. For other investors, a focus on the U.S. dollar is a strategic investment decision, writes Jennifer Dowty. Some companies, who earn most of their income in U.S. dollars, decide to pay dividends in that currency. One company especially worthy of note: Restaurant Brands International Inc. has announced four dividend increases in 2016, raising it by a penny a share each time. On the flip side, several companies have trimmed their dividends such as Encana Corp., Pan American Silver Corp., Yamana Gold Inc., and Potash Corp. Readers can see the entire list here.
Three dividend-growing stocks that yield more than 5%
What's better than a stock with a fat dividend? A stock with a fat dividend that gets even fatter with time. Contrary to what you may have heard, not all companies with outsized yields are stodgy and slow-growing. Some stocks deliver the best of both worlds: a high initial yield and a dividend that continues to grow. For investors, it's a potent combination, writes John Heinzl. He looks at three stocks with this profile, including Enbridge Income Fund Holdings Inc., Pizza Pizza Royalty Corp., and Brookfield Renewable Partners LP.
Dividend stocks dominate list of oversold TSX constituents
There are 34 oversold stocks this week – a big number and a surprise when the index rises more than 1 per cent. Income-related companies dominate the list, writes Scott Barlow. In the real estate sector, there's First Capital Realty Inc., Smart REIT, Allied Properties REIT, Cominar REIT, Boardwalk REIT, and H&R REIT. BCE and Rogers Communications represent telecoms. For utilities, we have Hydro One, Algonquin Power and Utilities, TransAlta Renewables and Emera. You get the picture.
A year-end tax checklist for investors
My grandfather was very wise. He always told me that there are three kinds of people: Those who are good with numbers and those who aren't, writes Tim Cestnick. I've since learned that there are three kinds of investors: Those who suffer through too much tax, those who don't care about taxes and those who add tax savings to investment returns. If you want to be in the last camp, consider the following year-end tax checklist.
RBC and Mawer big winners in annual Lipper Fund Awards
The finest in Canadian fund management was recognized for best-in-class performance, with RBC Global Asset Management and Mawer Investment Management emerging as the big winners among Canadian mutual fund providers. On Wednesday evening, U.S. fund-research firm Lipper Inc., a unit of Thomson Reuters, handed out awards to Canadian mutual funds and exchange traded funds for superior returns over the last three years. Mawer took home the group award in the Canadian equity and mixed assets groups, while RBC's Phillips, Hager & North won in the Canadian bond space, as well as in the best overall category.
Do you have the right type of TFSA?
TFSAs are a spectacularly useful financial tool, but you can buy the wrong kind, writes Rob Carrick. Some will only allow you to hold mutual funds and GICs, others don't have those restrictions so pay attention to those details, writes Rob Carrick.
Gordon Pape's mailbag: A marijuana stock, TFSA gifts and other investing concerns
Gordon Pape answers readers' questions in this article you can read here.
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What's up in the days ahead
Global financial and commodity markets are struggling for solid footing following Donald Trump's U.S. presidential election victory as confusion abounds about his economic plans. We'll be putting it into greater perspective this weekend and beyond. Rob Carrick's Saturday piece will profile a chief investment officer who's going big on investing in U.S. stocks; John Heinzl will have some well-timed portfolio management advice and David Berman will argue why there's a simple solution when it comes to copying two of the world's top investors right now.
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Compiled by Gillian Livingston