The QE program has finally ended! After the start of first QE nearly six years ago, the Fed has decided that they have bolstered the economy enough by ending the QE3. Although the Fed remains fairly optimistic about the economy, they have indicated they will not be rushing to raise the interest rates anytime soon. For the most part, economists expect the rates to rise either at the end of 2015 or early 2016. But then again, the same “experts” were forecasting that the rates would be up by now when asked a year ago…so who knows! The end of QE has brought some volatility in the market that has been very interesting over the course of October. Especially coupled with the fall in oil prices, there were plenty of opportunities for investors to pick up strong corporate names at discount prices.
Outlook for November 2014
November is expected to be just as volatile as October, although the market seems to still be adjusting to the end of the QE program. Some eyes are moving to overseas markets, esp Europe, which is facing deflationary risks and is expected to take the baton on QE from the US Fed. The European QE program might look very different from the US program, and some experts are skeptical of its impact on the economy and the markets. Meanwhile, Japan announced a surprise stimulus package on Halloween that is expected to help raise the markets not only in Japan, but would also benefit other markets (such as the US).
Specifically in the energy sector, the depressed oil prices will spell gloom for the energy producers – both companies and countries, while the energy consumers will invite these prices with open arms (both companies/sectors and countries). While I remain bullish on the energy sector in general, I am more bullish on natural gas in particular as I believe natural gas will be the place-to-be this century – just as oil was, in the 20th century. It is for this reason that I have chosen energy names such as Chevron (CVX) and Kinder Morgan Inc (KMI) as part of my portfolio, which in addition to oil/liquids has a huge (bigger than some of their competitors) stake in natural gas.
Monthly Contributions: I have been making monthly contributions to the following, which I am contemplating making changes to.
- iShares S&P US Dividend Growers ETF (CUD.TO) is an ETF of 83 dividend growers and provides me with exposure to excellent corporations across all sectors. The ETF has a 1.8% yield and pays distributions monthly. I have built a decent position in this ETF and while its an excellent selection, I am considering taking a second look as there have been new entrants from other ETF providers such as BMO and Vanguard. I will be reconsidering if I want to continue holding this ETF or switch to the others.
- iShares Canadian Financial Monthly Income Fund (FIE.A.TO) is an ETF of 24 Canadian financial equities (70%) and bonds (30%). The fund yields 7% and pays distributions monthly. This has been a great source of income in my portfolio. However, iShares has quietly raised the MER on this ETF, which is unacceptabl at 1.7%. There is a related fund with the same name but ticker FIE.TO, that has an MER of 0.9% and yields 6.5%. I am considering switching to either that or look for other funds.
- The Bank of Nova Scotia (BNS.TO) – I have a DRIP plan in BNS, but am contemplating cancelling to move the holdings over to a tax-sheltered account instead. I will posting more details on this in the coming days. Last week I completed a dividend stock analysis on BNS and found that it is currently 15% undervalued. Click here to read the full analysis.
What are your thoughts on the stocks mentioned here? Do you own them or are they on your watchlist? What do you think of the current market levels and buying here? Make sure to leave a comment below as I deeply value reading your questions and comments.
Photo Credit: Joel