Stocks Soar, Passive Income Growing

Hey everyone and welcome to another weekly recap post for May 30, 2020.  The markets made some pretty impressive moves this week.  Let’s talk about it.

But first, my disclaimer: this post contains affiliate links where the blog may receive a small commission on any sales from EQ Bank, Questrade and Tangerine.

Market Rally

The market had an impressive rebound this week with the S&P 500 closing above the all important 3000 level. The TSX did quite well too, closing above 15000.

Things are looking more positive. The economy is slowly opening, some demand is returning, new virus cases are declining. Hopefully this trend continues and the world can get back to normal.

Bank stocks soared earlier this week and made up a lot of the lost ground since the crash before giving some back at the end of the week.  All of them rose about 10% over 2 days. So I’m glad I was buying at the bottom. 

If you were on the sidelines waiting, well, you missed it for now.  But there will be opportunities over the next few months. Stock up on cash and Open a Questrade Account to start buying stocks.

As I said before, stocks can fall hard and fast but they can also recover quickly too.  That’s why it’s important to stay the course and to buy when they’re on sale, expect short term price moves, but stay focused on the long term.

Even with central banks pumping money into the system, I’m sure we’re going to see more volatility and corrections.  Those of us with conviction and cash will be able to take advantage of these situations.

Energy stocks are holding out and are probably range bound for the foreseeable future.  I can’t see there being any rise in demand over the next 6 months.  Airplanes are grounded and there are travel restrictions in place.

Gold and gold stocks took a big step back this week with the risk-on market attitude.  But by Thursday they were making a comeback as US-China relations deteriorated over China taking control over Hong Kong.

Right now, I have some cash on the sidelines waiting for another sell-off.  I also plan on paying down some debt while I wait for more opportunities.

And I’m sure those opportunities will eventually come.  There’s a lot of negative sentiment towards Canada’s stock market right now.  The banks are under fire, energy sector is down, mining beaten up etc. 

For nearly a decade now, we’ve been in a commodity bear market.  So we could be in for a big turnaround in the next year or two. 

So I’m actually quite bullish on Canada going forward.  We’re one of the few countries that could shut our doors to the world and we’d be fine.  We have lots of energy, agriculture, fresh water, lumber, base metals etc.  If only our various governments would get their sh*t together and work as Team Canada instead of the National No-Growth Agenda, we’d be way better off.

So going forward, I see lots of opportunity for Canada to outperform once global growth gets going. 

Passive Income Keeps Rolling In

Through all this market turmoil, the passive income keeps rolling in.  So far, only 1 of my companies (Suncor) cut their dividend and that was expected given how oil collapsed.  Luckily it wasn’t a big holding.        

But the banks are holding the line.  Their dividends are solid (despite Laurentian Bank’s cut) and once we get on the other side of all this, I’m expecting some big moves with the banks and more dividend increases. 

The online income is down by 50% as advertisers step back with their marketing budgets.  But it’s hanging in there and I’m starting to see an uptick as the economy reopens and we start a recovery.

For all you people stuck at home bored, consider starting your very own website for fun and to possibly earn some cash on the side.  Check out my How to Start a Blog post for my step by step guide.

Overall, if what we just experience over the last 2 months was a bottom then I can’t wait for the recovery!

What About Real Estate?

CMHC came out this week saying that Canadian real estate prices will fall by 18% over the next year or 2. That doesn’t bode well for cash strapped homeowners. For a decade, many observers have called for a housing crash in Canada and it never did materialize.

But the CMHC prediction is based on how they think the economy will perform. At this point, I don’t think anyone can say anything with authority about where we’ll all be in a year or 2. But that’s just me.

On a side note, I’m so glad I sold off the rental units a few years ago.  Housing prices will struggle over the next few years and tenants don’t have to pay their rent. 

Being a landlord can be tough, especially for the average person.  Unfortunately, rental laws disproportionately favor tenants and landlords are often screwed out of rent and have to pay for costly repairs.

For years, many people have been sold on the idea of creating passive income through real estate.  But with record home prices and the huge financing costs and debt loads, it’s just not worth it. 

As we have seen in this pandemic, many landlords are struggling to pay their mortgages with no cash flow coming in.  So when they needed it most, their investment failed them.

Then there is also the huge debt bubble out there.  Once it bursts, real estate prices will plummet which will send the economy into the gutter. 

Now I’m not trash talking real estate here, I actually want to buy another rental property at some point.  But I can’t justify buying at inflated prices, with huge mortgage debt, when tenants have all the power.  So I want to look at jurisdictions that are more favorable toward landlords. 

Save, Invest, Build Wealth and Prosper

In case you’re wondering here’s where I park my money and some financial services that I use:

For my Daily banking and no-fee cash back credit card I use Tangerine.  Curious?  Check out my Tangerine vs Simplii Financial review and the Tangerine Money Back Credit Card Review.

For my Savings I use the EQ Bank Savings Plus Account. Never heard of it? Click the link to check out my EQ Bank Savings Plus Account Review.

For investing I use a combination of TD Waterhouse (for legacy investments) and Questrade (low cost stock purchases and free ETF purchases).  If you haven’t done so already, check out my Questrade Review to see why it’s the best deal around.  Get $50 in Free Trades when you signup for Questrade through this link.