” You know it is a good deal when neither side is happy”
In the reflection section we looked at the market’s reactions to the news. The key event over the past month was the Memorandum of Understanding between the US and Iran. Even before the first drop of oil exited the Strait of Hormuz the price of oil began to collapse. All it took was the expectation of a deal to take the risk premium out of oil. That was fast. You might think a deal with Iran would assure their neighbours that peace was imminent. Then the logical thought would be the Israeli market would rise. Nope. The Tel Aviv 35 dropped by more than 8% after the deal. The S&P declined as well. I guess it may be a good deal since no one admits to being happy.
We have not changed our approach to the markets. We do consider world political events but focus on the long-term potential for the companies in which we invest. When looking at a stock we consider the total return. The total return captures the dividend and the capital return. Dividends provide a couple of advantages including when a client needs cash, they can just take the dividends and not trigger tax by selling a stock. In a similar vein, it helps when rebalancing a portfolio as the dividends can be invested in an area that is below the target level, again without having to trigger tax or commission expenses. Despite the whipsawing markets the Canadian banks still look attractive and offer the potential of higher dividends next year.
