Every week, Lower the Crap Investing founder Dale Roberts shares monetary headlines and affords context for Canadian traders.

October delivered the products

October delivered 7% features for the U.S. market (S&P 500). That topped the 5% provided in Could 2021. Canadian markets, as measured by the S&P Capped Composite, returned 5% for final month. These are loopy occasions for many markets, as 7% can be labeled as a stable 12 months for inventory markets. We acquired that 7% in only one month.

Worldwide developed markets, the EAFE Index, was basically flat for the month. EAFE is an acronym for Europe, Australasia and the Far East. 

As I wrote in final week’s “Making sense of the market” column, market historical past means that extra stable features are on the way in which for this November and December. However, in fact, something can occur with the markets, and that was admittedly a take a look at the seasonality of market returns—“only for enjoyable.” (Learn the column and you will note what I imply.)

Markets stalled late final summer season and early fall, however as I’ve typically written for MoneySense, strong earnings had been simply the enhance the markets wanted. Firms on either side of the border have been delivering very sturdy, and largely consensus-beating, earnings and income progress within the third quarter of 2021. 

This chart exhibits that shopper discretionary, power and progress shares led the way in which in October for U.S. shares.

Supply: S&P World

Liz Sonders at Charles Schwab wrote about it: “You’ve Bought to Earn It: Earnings Progress Robust, However Descending.” She affords some fascinating charts, trying on the year-over-year earnings developments by sector. 

“Progress is predicted to proceed its deceleration into the primary half of subsequent 12 months. From a sector perspective, Power is clearly the highest earnings driver—pushed by the “base results” relative to final 12 months’s pandemic/lockdown period when oil costs briefly fell into destructive territory. Apart from Power, the highly-cyclical Supplies and Industrials sectors prime the rankings, with the defensive Utilities and Shopper Staples sectors citing the rear.”

Again in July, I regarded on the peak-growth charges for shares. Peak progress doesn’t imply “issues are dangerous”—it alerts that the very best information is behind us. (That’s the reason it’s known as a “peak,” in any case.) This could begin to weigh on shares because the markets are very ahead considering. Today, traders are embracing the present excellent news earnings story and driving markets larger.

See a number of of the charts referenced above on this tweet from Sonders.

For 1st time since Jan ‘18, S&P 500, Dow, NASDAQ 100 & R2000 hit new all-time highs for 2nd straight session; Cons Discr led features whereas Power, Industrials, & Utilities fell … sturdy day for small caps with each Russell 2000 Worth & Progress climbing forward of large-cap cohorts pic.twitter.com/0aUutRSAp3

— Liz Ann Sonders (@LizAnnSonders) November 3, 2021

Within the sector efficiency chart, you’ll see that inflation-friendly power, financials, actual property and expertise led the cost in 2021. And, Sonders seems to be for point out of valuations for U.S. shares and a heatmap chart is referenced on this quote:

“Though the ahead P/E has retreated together with the surge in earnings, relative to historical past, it stays within the costly zone. Actually, […] most valuation metrics are within the crimson zone; excluding these which take a look at fairness market valuation within the context of the bond market and/or rates of interest.”

U.S. shares are costly in line with Sonders, however they’re cooling off a bit on that overvaluation metric. And given the returns of bonds today, shares look fairly good. Also called TINA: There Is No Different (to shares).

We’ll see if TINA can also stick round for November and December.

Cramer’s 5 unstoppable themes for the remainder of the 12 months

Jim Cramer is extra than simply an fascinating cat. A former hedge fund supervisor, he’s now the host of the speak present Mad Cash for CNBC, which is extra like an American soccer halftime assault on the senses, with calls made in break up seconds. Like with opinions round investing in bitcoin, the topic of Cramer is bound to type divisive camps of thumbs up or thumbs down. 

You may make up your individual thoughts, and we’ll maintain rating of Cramer’s prediction of “5 borderline unstoppable themes for the rest of 2021.” Right here they’re:

  1. The way forward for vehicles
  2. Surroundings (inexperienced power)
  3. Metaverse (the digital system world)
  4. The Cloud
  5. Oil and gasoline

I can’t say I disagree with the prioritizing of those 5 issues, and people funding themes have definitely been explored in my column. I might agree with what I see as these “plain developments.” This isn’t rocket surgical procedure (this malaphor may be very intentional). These developments are all unfolding in apparent style proper earlier than our eyes. 

These are extra than simply themes for the rest of the 12 months. They is perhaps seen as long-term developments, particularly no 1 by way of quantity 4. And, in the event you see them as long-term developments, then you definately may embrace each with endurance for returns over the approaching decade or extra—not the subsequent two months.

Expertise and the atmosphere have an effect on and form this complete checklist. Readers will know that I’m a giant fan of the oil and gasoline sector for my investments. And, sure, I’m additionally a giant fan of the planet: The 2 usually are not mutually unique. As an investor, I embrace the power actuality.

All stated, we all know there can be a extra significant inexperienced power shift sooner or later, and the oil and gasoline theme is prone to have an expiry date. Not less than I hope so, for the sake of the planet.

It is a good submit from CNBC. And Cramer affords concepts on methods to achieve publicity to these themes. You’ll discover many ETFs make these themes accessible to you. In Canada you may look to Evolve ETFs, Horizons and Harvest Portfolios Group to call a number of.

Jonathan Chevreau, MoneySense’s investing editor-at-large, checked out Cramer’s COVID-themed stay-at-home portfolio. From my observations, the portfolio thought did fairly effectively. It was a well timed name on a structural shift on how we spent cash in the course of the early levels of the pandemic.

Enjoyable with FAANG and acronyms

Cramer can be the creator of the famed FANG/FAANG acronym. And he’s suggesting to evolve the moniker to MAMAA, with every of these letters standing for Meta, Apple, Microsoft, Amazon and Alphabet (Google). To not be outdone, Motley Idiot analyst Invoice Mann is suggesting MANAMANA, which provides Adobe and Nvidia to the same old checklist. 


MANAMANA pic.twitter.com/Xi9i7a986r

— Invoice Mann (@TMFOtter) October 31, 2021

Is Amazon fulfilling electrical car orders?

Amazon (AMZN) is about to ship electrical automobiles (EV) to Amazon. Let’s hope they get the tackle proper!

From CNBC: 

“Amazon-backed Rivian is growing industrial last-mile supply vans for Amazon, which has stated it plans to have 10,000 vans on the highway by 2022 and 100,000 by 2030. Rivian additionally beat Tesla, GM and Ford to the market with an electrical pickup, the R1T, which has acquired early acclaim.”

And, the EV parade continues:

“The valuation would make Rivian the titan amongst a crop of electrical car start-ups and not too long ago public corporations from the U.S., together with Fisker, Lordstown Motors and Lucid, and would put it on par with Chinese language electrical car maker Nio. It will additionally imply Rivian is just barely much less invaluable than conventional automotive giants reminiscent of Ford, which is an investor in Rivian; Stellantis, which was created from the merger of Fiat-Chrysler and PSA; and GM.”

There appears to be no cease gentle for the push to electrical automobiles.

And the bucks and different inexperienced cash will movement to the clear power sector as effectively. However we should always keep in mind an EV is just nearly as good or clear as the facility supply that it plugs into.

On the 2021 United Nations Local weather Change Convention (a.ok.a. COP26), the world’s largest asset supervisor BlackRock (BLK) raised US$673 million for a climate-focused infrastructure fund that can give attention to clear power initiatives for rising markets.

From Reuters:

“Rising economies, together with international locations throughout Africa, Asia and Latin America, will want round $1 trillion a 12 months out to 2050 to assist them transition to a low-carbon financial system, BlackRock stated. In 2020, simply $150 billion was invested, excluding China.”

There may be rising stress on banks and monetary asset managers to play a job in enabling the inexperienced transition. Reuters quotes BlackRock CEO Larry Fink:

“We might have raised much more, and this can be a nice instance of leveraging what public capital can do,” Fink stated. He additionally backed the idea of power corporations spinning off a portion of their belongings and stated world leaders ought to rethink how establishments just like the World Financial institution could possibly be reformed to harness extra private-sector lending. “We’re going to have to vary finance,” he stated.

This stress to maneuver inexperienced could possibly be seen as a chance, or even perhaps a threat, for asset managers, if cash is “pressured” to fund unprofitable ventures.

This 12 months has proven us that we’re at present not shifting very effectively towards being greener. Because of underinvestment in conventional power sources, we’re seeing worth spikes in oil and gasoline, together with power shortages.

Search the phrases “power disaster” on Google, and also you’ll get a number of million analysis alternatives on the present state of the atmosphere.

It’s not that there are not any viable inexperienced power options out there. I used to be very inspired to search out this text “Explaining the Exponential Progress of Renewable Power.” The World Assets Institute studies that wind and photo voltaic have gotten increasingly cost-competitive with conventional power. In 2010 ,wind and photo voltaic made up 1.7% of worldwide power era. That’s climbed to eight.7% in 2021.

Extra from the World Assets Institute submit:

“Falling prices have been the most important issue within the explosion of renewable power. Since 2010, the price of photo voltaic photovoltaic electrical energy has fallen 85%, and the prices of each onshore and offshore wind electrical energy have been reduce by about half. Each of those renewable sources are actually cost-competitive with fossil gas electrical energy.”

Have a learn and consider it as your homework for the week. I’ll shine extra gentle (and provide extra dangerous puns) on the photo voltaic and renewables house in future columns.

In fact, by no means take one opinion or one submit as gospel. You’ll find opinions and stats are all over in terms of clear power and the atmosphere. Make use of that crucial essential considering.

In the meantime, again on the oil patch

Some Canadian power producers have reported outcomes this week. The free money movement gushers proceed within the Canadian oil and gasoline patch. They’re paying down debt, shopping for again shares and juicing these dividends.

Final week, I discussed Suncor (SU) doubled its dividend.

Canadian Pure Assets (CNQ) delivered on each entrance. It elevated its dividend by 25%.

Cenovus Power (CVE) doubled its dividend.

Paramount Assets introduced a tripling of its dividend.

Tourmaline Oil (TOU), a number one pure gasoline producer, delivered a file free money movement and elevated the common dividend by 5.9%. And TOU not too long ago delivered some very beneficiant particular dividends, and it plans to maintain these particular dividends flowing over the subsequent a number of quarters.

As I’ve prompt—for a number of months now—many analysts see the oil and gasoline sector as the best supply of dividend progress within the close to future.

That’s greater than taking part in out to script.

Are Canadian financial institution dividend will increase on the way in which?

On Thursday, November 4, 2021, Canadian banks, and different monetary establishments, lastly received the go-ahead to extend dividends and purchase again shares. Throughout the pandemic, they’ve been restricted from these actions by the Workplace of Superintendent of Monetary Establishments (OSFI), the banking business’s regulator. 

From the OSFI press launch …

“Starting as we speak, establishments could once more enhance common dividends and govt compensation. Moreover, topic to the prevailing requirement for Superintendent approval, they might as soon as once more repurchase shares.”

There was beneficiant hypothesis as to how beneficiant the dividend will increase is perhaps, particularly for the massive Canadian banks.

Within the Globe and Mail, banking reporter James Bradshaw framed the potential dividend gushers (paywall).

“Banks will need to use a few of that capital to spend money on their current companies, and a few could need to pursue acquisitions. However as a gaggle they’ve ample capital and revenue to assist dividend will increase of 20 to 25% on common over the approaching quarters, stated Rob Wessel, managing associate of Hamilton Capital Companions, in a latest observe to shoppers.”

Nationwide Financial institution (NA), Financial institution of Montreal (BMO) and Royal Financial institution of Canada (RBC) seem to prime the dividend progress lists. The Globe studies analyst at Canaccord Genuity Group Inc., Scott Chan’s predictions.

“To revive typical ranges of shareholder payouts, he estimates dividends would want to extend 38% at Nationwide Financial institution and 32% at BMO.”

Lately alone website, I reported how the massive Canadian dividend shares had been again to beating the market. This information may assist that trigger even additional. We’ll see if these dividend will increase had been already priced into the shares. 

Traders needs to be more than pleased to obtain these greater dividends. Particularly these retirees that depend on the massive financial institution dividends to assist fund retirement.

Comfortable Canadian Financial institution Dividend Improve Day!
Dale Roberts is a proponent of low-fee investing and he blogs at cutthecrapinvesting.com. Discover him on Twitter @67Dodge.

The submit Making sense of the market this week, November 7 appeared first on MoneySense.

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