Just the Relevant Stuff

This section contains archived content from a variety of internal and external third-party providers that we find to be particularly useful, topical, or exemplary of thought leadership.  You'll not find links to recipes, travelogues, or sport blogs here.  Being respectful of your time and the likely reason for your visit to our site, only well considered and written posts on financial and wealth planning matters will be curated.

For ease of reference, we have divided the curated links into two broad categories: "Topical" and "Educational".  We have also added a small descriptive comment to each link to help you better decide whether the curated article might be of interest to you.  To maintain relevancy, Topical Links will be posted and culled regularly, while Educational Links will enjoy greater permanence.  And lastly, recognizing that visitors to our site have widely ranging levels of interest in financial matters, we have used our judgment to loosely assign a 3-point suitability scale to each link.

 

Topical Links

Addressing Concerns of the Day

 
MIGHT EXPERTS (INCLUDING THE FED) HAVE TO RE-EVALUATE THE LEVEL OF CAPACITY IN U.S. EMPLOYMENT WHILE ALSO MODIFYING THEIR INFLATIONARY MODELS?
 
 
An interesting and timely article from the New York Times looking at  the exceedingly strong U.S. employment picture, and whether it might be time to reconsider what the U.S. economy is capable of achieving in light of persistently low inflation.
Date of Posting: December 6, 2019
Suitability Rating: 1 - Straightforward and Easily Accessible
 
WHAT, IF ANYTHING, IS PREVENTING NEGATIVE INTEREST RATES?
 
 
Negative interest rates have become reality through much of the developed world outside of North America. Whatever the cause (and our October 3 posting two articles below makes the case that demographics are the culprit), is there any structural reason why it couldn't happen here?  Despite the U.S. Federal Reserve's musing that it wants to maintain the sanctity of the "zero bound" (i.e. keep interest rates positive), this well supported article suggests that negative rates could easily become reality in North America too. Refinitiv, and the their partner Fathom Consulting, argue it's time to take the prospect seriously.
Date of Posting: November 4, 2019
Suitability Rating: 2 - The case is compellingly made, requiring a modest understanding and interest in financial concepts
 
WITHOUT MUCH FANFARE, THE YIELD CURVE "UN-INVERTS"
 
 
Kevin Flanagan, Head of Fixed Income Strategy for Wisdom Tree Investments, writes about the recent un-inversion of the bond yield curve.  Owing to a media predisposition for negative news headlines, this closely watched recession indicator received broad-based news coverage (even outside of the traditional business news) when it inverted earlier in 2019.  The un-inversion, not so much.  Interestingly, like RBC, Mr. Flanagan holds the view that the U.S. economy will avoid recession, even using the same "base case" terminology that I and RBC have been using throughout most of this year.  The article is short, easy to understand, and very much to the point.
Date of Posting: October 23, 2019
Suitability Rating: 1 - Straightforward and Easily Accessible
 
WILL INTEREST RATES MEANINGFULLY RISE WITHIN A GENERATION?
 
                            
 
One recurrently topical theme in our weekly updates, as well as a question we consistently receive from clients, is what our team's expectation is for the direction of interest rates.  Not surprisingly, owing to the tie between interest rates and the economy, we consider this question from a variety of angles on a nearly daily basis.  However, taking a step back, and looking even beyond the multi-year economic cycle, demographics suggest we may be dealing with near zero rates for much longer than anyone ever expected.  Perhaps a time frame measured in generations.
Date of Posting: October 3, 2019
Suitability Rating: 1 - Straightforward, and of Nearly Universal "Interest" to all Readers
 
THE FED CALLS TIME FOR A REALITY CHECK
 
 
In this reasonably accessible commentary, Sonal Desai, PhD of Franklin Templeton Investments, examines why it was necessary for the U.S. Federal Reserve to reign in runaway market expectations for future interest rate cuts.  She paraphrases that "the message from the Fed is that there is no reason to panic, we are not on the verge of a recession, and there is no reason to expect massive further monetary easing."  We at Scholte Wealth Management agree: growth has slowed and risks have risen - but imminent recession does not appear to be the "base case" moving forward.
Date of Posting: September 18, 2019
Suitability Rating: 1.5 - A Short Read with a Readily Apparent Message; Details May Require Some Basic Background Knowledge
 
IS A U.S. RECESSION INEVITABLE?
 
 
Brian Levitt and Talley Leger of Invesco Canada debate the likelihood of U.S. recession.  As with any large organization - including RBC - differences of opinion are inevitable, and encouraging open debate is key to sound decision making.  Invesco's conclusions are similar to ours - risk of recession has risen, but it is not inevitable.  A Chinese trade resolution might quickly change the narrative.
Date of Posting: September 10, 2019

Suitability Rating: 2 - Slightly More In-Depth for Those With Interest

Educational Links

Investment and Wealth Planning Concepts

 
WHY DIVIDENDS MATTER
 
 
Portfolios managed by Scholte Wealth Management strongly favour investment in dividend-growing blue chip businesses.  In fact, as at the date of this writing (September 8, 2019), only one stock investment ever held in any of our client portfolios has yet to pay a dividend (Amazon Inc.).  Dividends are integral to total return and enhanced portfolio stability.  Importantly, dividends are a strong indicator of a company's financial health, and the requirement to pay a regularly recurring or, better yet, growing dividend enforces capital discipline upon the management of a company.  The attached link provides a good primer.
Suitability Rating: 1 - Readily Accessible for all Levels of Interest
 
ECONOMIC GROWTH IS MORE COMMON THAN RECESSION
 
 
No less an authority than the U.S. Federal Reserve asserts that economic expansion is the normal state of the economy.  In other words, expansions are the rule, and recessions are the exception.  Further, over the long term, the cumulative benefits of economic growth far outweigh the damage done by recession.  Simply put, ever improving productivity and population growth are the main reasons why developed economies spend more time growing than shrinking.  That said, clients know that we spend much time and effort looking out for recession, because its impact on investment portfolios is disproportionately extreme.  Yet it's important to reiterate that expansion is the "normal" state, and letting fear of recession excessively dictate portfolio positioning will likely result in a sub-optimal outcome.
Suitability Rating: 1.5 - The first half of the article makes the point well; the second half read if interested (you may have to "X" an ad that pops up)
 
NEGATIVITY BIAS: GOOD FOR EVOLUTION, NOT SO GOOD FOR INVESTMENT RETURNS
 
 
Focusing on the negative helped our ancestors avoid life-threatening dangers.  But dwelling on the negative is not so beneficial when it comes to generating sound portfolio returns.  As asserted above, economic growth is the normal state for the economy.  Recessions do NOT lurk behind every over-hyped negative news headline. With economic growth comes improved corporate profitability and higher stock prices.  We at Scholte Wealth Management strongly believe that attempting to time short-term market swings - the impulse to do so most often being rooted in fear - is a losing proposition.  Accordingly, we spend a great deal of time and effort helping our clients avoid this impulse.  Full disclosure: we believe recession is the exception, and certainly do attempt to reduce our clients' equity weightings if a credible and imminent threat of recession exists.  Recessions do disproportionate damage to a portfolio, and we therefore spend a disproportionate amount of our time on the lookout for a credible threat of recession.
Suitability Rating: 1 - Readily Accessible for all Levels of Interest

 

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