Not unlike what we witnessed at the beginning of August, September began with more volatility across the board. Notwithstanding the whiplash (which I suspect is here to stay - especially as the US election rhetoric heats up), we are all experiencing a very robust portfolio gain so far (to yesterday’s close) in 2024, with the following indexes leading the way:

S&P TSX – ytd +9.87%

S&P 500 – ytd +14.70%

Nasdaq – ytd +12.48%

In the fixed income realm, the preferred share space has rebound significantly (some as much as +40% or higher), thanks to the Bank of Canada having lowered interest rates by a quarter point, three times (June, July and last week). The policy rate now sits at 4.25%.

As I’ve stated numerous times, as soon as interest rates started to come down, I felt certain that (in particular) our Canadian Banks, Real Estate Trusts, Utilities, Energy and Communications holdings, with their attractive dividend yields, would begin their ascent. When an A-rated corporate bond continues to pay less than GICs, and all of those yields collectively are on the decline, it makes sense that focus would shift back to the higher dividend, good quality blue-chip names. Simply put, these dividend yields are far superior and significantly more attractive, particularly from a tax perspective, for non-registered portfolios.

To illustrate what I’m saying above, many of us own Bell Canada shares and as we know all-too-well, they had indeed been underperforming from a historical perspective. In early July we saw the price bottom at $42.58. Since then, we’ve seen a rebound of over +14%, to close last night at $48.95.

In looking ahead to the next Bank of Canada meeting on October 23rd (happy birthday to me), policymakers have reiterated their concerns regarding undershooting their 2% inflation target. Governor Tiff Macklem stated, “We need to increasingly guard against the risk that the economy is too weak and inflation falls too much.” A Bloomberg survey found that most economists expect the bank to cut by 25 basis points at the next four meetings, bringing the policy rate to 3% by mid-2025. In my view, this is good news for a great deal of our portfolio holdings.

Thank you and have a great September!

Libby

 

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The information contained herein has been obtained from sources believed to be reliable at the time obtained but neither RBC Dominion Securities Inc.* nor its employees, agents, or information suppliers can guarantee its accuracy or completeness. This report is not and under no circumstances is to be construed as an offer to sell or the solicitation of an offer to buy any securities. This report is furnished on the basis and understanding that neither RBC Dominion Securities Inc. nor its employees, agents, or information suppliers is to be under any responsibility or liability whatsoever in respect thereof. The inventories of RBC Dominion Securities Inc. may from time to time include securities mentioned herein. RBC Dominion Securities Inc. and Royal Bank of Canada are separate corporate entities which are affiliated. *Member CIPF. ®Registered trademark of Royal Bank of Canada. Used under licence. ©Copyright 2004. All rights reserved.

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