The right stuff

Well, poor Tatiana. My colleague yesterday waded into the dark swamp of negativity that this pathetic blog bobs upon, and was thwacked for suggesting women can be better investors.

Did she learn anything?

Of course. To ignore you.

In fact, the harpies on this site are reflective of an ingrained wussiness and visceral fear that permeates society. Too bad. While so many are hiding under rocks, beneath mortgages and squirreled into GICs, the world is moving on. Look up. Life is good.

In case you missed it, the stock market has leapt about 20% from its lows. Despite Putin, China’s Covid craziness, inflation, higher rates, Harry Styles, snow in Surrey, Trump again and SBF, investors have been embracing risk because they see a bright future. As we’ve been telling you for a while, 2023 looks like a winner. Any recession will be a short nothingburger (RBC agreed yesterday), interest rate increases will end in the Spring, inflation will moderate, Ukraine will get fixed and China will do a health pivot. Those are just reasonable expectations.

But look at this…

When accountants (CPA Canada) surveyed clients about the economy, the results were shocking. Only 9% were optimistic for the next year – down epically from 52% a year ago. The top problems were inflation (21%), rates (16%) and global stuff (15%). Over 70% think inflation will hurt their business or employer.

This black mood is likely influenced by real estate, now the most impacted asset for most people. Mortgage rates have doubled (or more). Another increase comes next Wednesday. Hundreds of thousands of variable home loans have hit their trigger points. Sales have tanked. With the Canadian economy twice as dependent on house horniness as the American one, no wonder we’re a nation of depressed beavers drowning our sorrows in syrup. And sniping at female financial advisors.

So, snap out of it. Digest the facts.

First, inflation is falling. No, really. Down in Canada and lower in the US. The latest data (Thursday) was encouraging as the personal expenditures price index posted a smaller-than-expected gain, the second-lightest of the year. It showed spending is up and savings down (a 17-year low). Logic tells us people turtle, pull in their horns and hunker down when they sense bad times are coming. Americans are not. And it’s interesting that the savings rate is way up in Canada (to 5.7%) and way down in the States (2.3%).

So, one of us has it wrong.

Did you see what happened Wednesday? Fed boss Jerome Powell said (a) there’s progress on getting costs under control, so (b) the next rate hike in two weeks will be smaller and (c) there will be a pause, maybe an end to rate hikes, in the next few months. He also said inflation is going back down to 2%, and didn’t giggle. In response, Mr. Market roared, investors poured in, bond yields dropped, stocks shot higher, the US$ decreased and the stage was set for the next big event – jobs numbers out tomorrow. They will be fine. The unemployment rate will stay buried in the 3% range. So you can stop fretting about a recession.

In short, 2022 may go down as a year of triumph for the CBs. The storyline: rates exploded higher after inflation ignited (thanks to Putin, post-Covid, oil, the supply chain and Xi). Monetary authorities laid rubber with aggressive rate hikes while being careful not to go too far. We now end the year with full employment, reasonable growth, no recession, doused house lust, recovering financial markets, weakened inflation and – yes – the prospect of a soft landing.

What’s not to feel good about? Why are we morose? Trashing females and central bankers? Sad.

So the predictions here stand. Rates will rise some more, pause, and hold. No declines in 2023. Maybe none in 2024. After all, they’re still cheap by historic norms. Thus, real estate will continue to be a risky buy and a tenuous sell. Meanwhile, no serious recession. GDP growth. Inflation drifting lower. Some kind of Ukrainian peace. Way less drama than 2022.

Finally, today, a unique offering thanks to blog dog Larry. He tells me he’ll soon have the ear of the Tiffster, and is asking for policy suggestions.

Hope all is well and as always thank you for the continued efforts to educate the masses! I’m in the fortunate position to be at a small dinner with Gov. Tiff Macklem in a few weeks.  I am polling other leaders and those in positions of knowledge what they would like to put forth to the Bank of Canada.   My main objective, being a retailer, is to get the bank to move on the ridiculous duopoly of Visa and MC on their insanely high interchange fees. They are regressive and cost consumers billions a year more than other first world countries.   The bank has the teeth to do something here as they regulate that area of our economy.

What would your angle be?   Many don’t like the interest rate hikes but they are needed and one of the only tools available to the bank.   I won’t be suggesting or advocating to do otherwise and bring rates back but I am definitely interested what your thoughts would be.

Frankly, L, it looks to me like history will judge our CB to have done exactly the right thing at the right time. Flood the pandemic with money to rescue the economy from a scary event. Then starve the recovery via higher rates to quell our animal spirits. The political foolishness about firing Tiff, blaming the Bank of Canada for causing global inflation or printing money for political masters was nothing but theatre. Like supporting the truckers. Or blaming the WEF.

In a country run by egomaniacs, manipulators, fake communicators and folks with nice hair, it’s comforting to have an adult in the room. Tell him that, Larry. And, for God’s sake, don’t let him read the comments section.

About the picture: “Here is the lion in winter,” writes a regular poster asking to be anon. “Abandoned by previous owners of the acreage property sold to my brother, neighbours advised his name was Scoobie Doo.  At first, determined to keep undercover and independent, he eventually came running one day when his name was called.  Even the resident German Shepherd received a daily master class in ‘who’s your daddy’.    No one knows how old he was when he died, wrapped in his favourite blanket, in the arms of my sister in law.  With his boots on.”

The wealth gap

   By Guest Blogger Tatiana Enhorning

Women are great investors, that’s a fact. As shown in a recent Fidelity survey of over of five million US investors throughout the last ten years, on average females outperformed males. Women are educating themselves more about financial planning and investing and taking decisive action to reach their financial goals. This along with their propensity to stick to their investment decisions and be less likely than men to day-trade or invest in speculative assets like cryptocurrency, leads to very positive momentum for women.

But, even though female investors tend to do better performance-wise, they still invest much less than men. According to S&P Global, while over 77% of Canadians have investments, only 21% are women and 79% are men. Hence the gender pay gap’s more terrifying and its lesser known sister, the wealth gap. On average in North America, the raw gender wealth gap shows the median wealth of females was just 55 cents for every dollar of male wealth – the difference between total assets and debt.

Needless to say, women are concerned. In October 2022, a survey by Ellevest found that women’s financial health is at a five-year low, and women now spend a significant amount of time worrying about their finances. A majority reported worrying about their finances at least once a week, and a whopping 43% actively worry about money at least once a day. Women reported fretting about finances at a higher rate than men on both a weekly and daily basis, and this is not unfounded. Statistically, by retirement men have, on average, triple the total assets of women.

So why is this? Are women just bad at saving?

Actually, saving is not the issue. The same Fidelity study showed women save 9% of their salary compared to men, at 8.9%. But the pay gap persists, women still earn an average of 75% of what men earn across all full-time workers in Canada and 89% for full and part-time workers combined.

Although women and men do face many similar issues when it comes to financial health, such as inflation and current consumer confidence, there are other circumstances applying only to women which bolster the significant pay and wealth gaps. These include women being under-represented in high paying jobs and having less access to retirement benefits; women taking the majority of parental leave which affects promotions; and women providing more financial support to family members than men. Even if all of those factors were not stacked against women, there is also the longevity factor. If we compare a single man and single woman who have built up the exact same amount of wealth by retirement, the women would still be at more risk of running out of money, as women tend to live longer than men.

Don’t mistake this for a rant. It’s a call to action. Concerted effort and time are required to close the pay gap, but we can start working on closing the wealth gap now. Let’s empower the women in our lives to become more knowledgeable and involved in investing to better prepare for their life goals and for retirement.

Add Exposure: It seems much more common for men than for women to chat openly with friends or family about the stock market or economy. This may seem trivial, but lack of exposure could very well be where lack of investing confidence begins for women. If from an early age, men are exposed to conversations regarding other people’s investing experiences, they are gradually learning and getting used to it all through osmosis. Let’s bring the women and girls we know into the fold to start building their interest and awareness.

Get started: I often hear women say they want to invest, and know they should, but don’t know where to start. Encouraging women to place even $500 into an index fund when they are young can boost confidence just by getting their feet wet and watching the ups and downs of the market while stakes are low. If we can embolden women to start small sooner and learn along the way, this can make a big difference. The cost of waiting to start investing is enormous. The longer we wait, the more daunting it becomes, not to mention the lost years of compounding. If one person starts at age 20, investing $5,000 per year in an ETF earning 6%, they will have $871,667 by age 60. If all else is equal but they wait to start until age 30, they will end up with about half at age 60, $447,726.

Gain Confidence: Research from FINRA suggests 71% of men think they have a high level of investment knowledge, compared to just 54% of women. This translates to 49% of men feeling comfortable making investment decisions for themselves, compared to just 34% of women. If we can help women see themselves as savvy investors through exposure and experience, women will likely invest much more.

Closing the wealth gap is much easier said than done, but we must start somewhere and we can start now. Encouraging women to invest more is a very powerful step in the right direction, and who knows, maybe one day it will lead to more than 15% of Financial Advisors being women as well!

Tatiana Enhorning is a Financial Advisor with Turner Investments. She builds and maintains portfolios for clients across Canada, and has been in the business as an asset manager for more than a decade.