In this edition of Market Factors, I’ll discuss my search for a secular change in the rate and yield environment. We’ll move on to the beneficiaries of the Soviet-style policy of the U.S. president, and the diversion will cover my year in TV watching.
Income investing
No repeat next year for high-flying dividend stocks
Credit markets indicate a mere 5.3 per cent chance of a Bank of Canada rate cut on Dec. 10 and a 7.7 per cent chance of a cut on Jan. 28. As a result, it could be a much more boring year to be holding dividend stocks.
The S&P/TSX Utilities index is higher by 21.9 per cent (total returns) as of Wednesday morning, a terrific year for a defensive sector. Bank of Canada rate cuts and their downward pressure on bond yields were among the biggest factors driving the rally.
Bonds compete with utilities and pipeline stocks for investor assets and when bond yields go down, the yield on dividend-paying stocks is more attractive. Stock prices move higher.
Consensus estimates point to a market environment less conducive to strong returns from defensive, dividend-paying sectors. The current ten-year government bond yield is 3.2 per cent and economists expect it to average 3.25 per cent next year.
Inflation pressure hovers stubbornly at near 2 per cent and economists expect it to remain there for 2026. This will likely keep the Bank of Canada on the sidelines in terms of rate cuts for the majority of the year.
Macroeconomic factors are not the only drivers of dividend-paying stock returns. Income sectors might still have a strong 2026 if economic growth falters, for instance. The most recent retail sales data showed September core sales were lower by 0.5 per cent month over month. Further weakness would see investment assets move from economically sensitive sectors into the relative safety of utilities and pipelines.
There are always individual winners that perform well despite a negative sector backdrop. Investors should be watching for the energy transport beneficiaries of the new LNG facility on the B.C. coast with this in mind.
In broader terms I am looking for an inflection point. Interest rates and bond yields declined reliably from 1982 to 2020, making dividend-paying equities look better and better every year. Rates have been climbing since that point and if this is a secular move – the reverse of 1982-2020 - the environment for dividends will become a lot more difficult, and for a long time. We don’t seem to be quite there yet but it’s coming.
President Donald TrumpALLISON ROBBERT/The New York Times News Service
Critical Minerals
Stocks that could be Trump’s next targets
The Trump administration has taken a turn for the statist, buying up equity stakes in industries like rare earth minerals and semiconductor equipment deemed important to national security. This is a change from historical precedent of investment only in time of crisis and probably a terrible idea. But it is causing positive market action in the targeted stocks: they are up an average of 60 per cent since the government bought in.
Julian Emanuel, a strategist at New York-based Evercore ISI, attempted to identify the next beneficiaries of the policy in a recent report. He used an AI-enabled screening methodology analyzing the strategic importance of thousands of companies in the technology, defence, resources, health care and manufacturing industries.
So far, five of the nine investments have been in the critical minerals sector, including a complicated arrangement with Canadian uranium producer Cameco Corp. An export license arrangement with Nvidia and AMD and a major investment in Intel are also central to the plan.
Mr. Emanuel highlighted five publicly traded candidates for investment: Wolfspeed WOLF-N (a semiconductor producer with ties to U.S. defence stocks), Amkor Technology AMKR-Q (semiconductor assembling and testing), Centrus Energy LEU-A (nuclear power), Albemarle ALB-N (critical minerals, energy storage), and Ioneer IONR-Q (critical minerals).
Rhea Seehorn (left) in PluribusAnna Kooris/Apple tv
Diversions
’Tis the season for binge-watching
I found a list of Top TV shows of 2025 from Rotten Tomatoes and had to go down to #18, The Lowdown (the new Ethan Hawk show), to find a series I had watched and liked. The list favours more recent releases - Pluribus is number one - but it’s still a good excuse to review my picks for best TV.
Adolescence stands alone as the towering achievement in television this year. It’s that good. It is unbelievable that it was teen actor Owen Cooper’s first real role.
The Lowdown is also good. It’s subtle, funny and poignant but The Pitt is my favourite new show of the year. The loose remake of ER (enough so that the Michael Crichton estate was suing the producers) was judged very accurate by actual emergency room doctors and the drama was intense and terrific.
Alien: Earth gets an honorary mention here as does Dept. Q. No amount of quiet, menacing Tom Hardy characters is too much for me so MobLand gets a shoutout too. Strange that MobLand didn’t get very much attention given Helen Mirren and Pierce Brosnan in the stacked cast.
As for returning shows, Severance is fantastic but it seems to take effort to watch - you have to be up for it. The Newfoundland location for one plot line was an added bonus. Slow Horses with Gary Oldman used to be one of my favourite shows but it’s getting repetitive. Still good though.
Everybody likes Andor except me. I’m not saying anything bad about it but it just didn’t hit me. I openly dislike White Lotus because all the characters are horrible people from what I’ve seen. I never picked The Bear back up after the iffy first few episodes of season three.
Things I haven’t seen but will get to include the most recent season of Wolf Hall, Pee-wee as Himself (I have outlier taste in this area - I consider Pee-wee’s Big Adventure the funniest movie ever made, most likely because Phil Hartman wrote a lot of it), The Studio, Hacks season four and Code of Silence. Everyone says Dying for Sex is brilliant but the premise- a dying woman looking for physical fulfillment - sounds depressing.
Let me know your top picks for the year.
The essentials
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Globe Investor highlights
Robert Tattersall explains why diversification better positions your portfolio for a recovery phase - but helps less when it comes to short-term pain
Record reverse stock splits are exposing a growing divide between small caps and megacaps
A look at how Canadian utility stocks shape up when it comes to their price vs. intrinsic value
Quick Hits
U.K.-based economist and author Duncan Weldon asked an important question on social media this week. Mr. Weldon is too young to have been in the industry in 2000 so he asked, “when did people realize that the dot-com bubble had actually peaked?”
It took months. At first, the March 2000 sell-off was merely viewed as a continuation of the volatility seen in 1998 and 1999, a temporary interruption in the tech boom. This is an important reminder that no one rings a bell at the market top – investors tend to convince themselves that the bull market is still on while they’re giving back a lot of their gains.
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Here are a few headlines I saw just in the past few days: “Meet The Whale That Just Brought Us One Step Closer To Curing Cancer— A Biologist Explains”, “Breakthrough discovery reveals new drug target to stop pancreatic cancer spreading”, “Reviving Exhausted T Cells Sparks Powerful Cancer Tumor Elimination”, “Scientists May Have Found a Way to Stop One of the Deadliest Breast Cancers” and “Breakthroughs in Cancer Treatment in 2025 – Vaccines, Targeted Drugs & Gene-Based Therapies”.
It seems like they’re getting close to curing cancer or at least developing enough new treatments to make fatalities rare.
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Venture capitalist Peter Thiel sold his entire stake in Nvidia during the third quarter. I’m not sure what to make of this even though it’s obviously not positive news for the stock. Mr. Thiel is more or less the boogeyman for those concerned that tech billionaires will run the world and his actions will always be viewed as sinister in some quarters. On the other hand he is one of the most experienced and successful traders of tech stocks. He also might just be taking some profits.
Your chance to participate - and win cash
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