Outlook for June 2016

June already?! We will soon be hitting the half-way mark for the year and the overall market cant make up its mind. All eyes will continue to be on the US Fed this month whether the threats to raise interest rates carry any weight. Most economists and investors seem to think that the Fed will not raise rates, but at the same time – they seem to add a caveat saying that a 0.25% move does not change much.

As we’ve noted, the time to raise was years ago and the Fed missed the boat and raising the rates now will only jump-start the next recession. To which I say, bring it on. I have been building cash position in my portfolio and cleaning out some of my weaker names that I have no confidence in (see my recent sells here). A market downturn should be welcomed by most long term investors as it provides us with a great investment opportunity.

On the home front (Canada), things are continuing to mozy on. The oil crash and the wildfire in Alberta has left the overall market in shambles, while people continue borrowing beyond their means and buying houses they cannot afford. We continue to wait for a housing crash hoping to possibly move on an investment property.

Outlook for June 2016

As things stand, there are a lot of headwinds facing the economy. Potential recession/depression troubles still exist. The bond market, commodities market, transportation market, manufacturing market indices are all sending very strong signals that all is not well in the world. Some sectors are seeing an “earnings recession”. It is for this reason that gold and silver, typical safe havens, has done well in the last couple of months. Generally speaking, things haven’t changed much since my Outlook for 2016 (from January) post. Be sure to check it out for further investment ideas.

R2R-Portfolio-Jun1

Portfolio Considerations

One sector where I’ve finally started making a move on after staying on the sidelines are the precious metals. I recently shared our plan for a Multipronged Approach to Investing, where I disclosed that I will not be limiting myself to the DGI (Dividend Growth Investing) model. This expands my horizons a bit looking for undervalued or momentum plays for companies that typical get dropped by DGI screeners. Earlier this week, I also disclosed the first move in this space in the beaten down sector…a streaming company – Silver Wheaton Corp (SLW.TO). We will continue to look at this sector closely and more purchases can be expected.

I am currently reading and learning a lot about the mining industry. Its a space that I do not understand well, and I hope to build my knowledge up from scratch. The commodities are hated right now, and have been for a while, but the moves in Q1 2016 have been promising. Perhaps this is the start of a new bull market? Or is it a dead cat bounce? No one really knows…but I think its a good time to start loading up some shares in the sector as its one area I find presents good opportunities.

As it stands, our current portfolio diversification is as shown below:

image (1)

Dividend Increases

June is expected to be a slow month when it comes to dividend increase announcements. I am expecting only one company to announce an increase our portfolio.

  • Realty Income Corp (O) – last increase was 0.25% in Mar 2016

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 value reading your questions and comments.

Disclosure: Our full list of holdings is available here.

12 thoughts on “Outlook for June 2016

    • Thats always the case, isnt it 🙂
      My gold/silver and REIT assets are doing great. The Fed will end up destroying the dollar in order to achieve inflation. Hard assets are where you need to be.

      Thanks for stopping by and commenting
      R2R

  1. Jane says:

    Do you hold Brookfield Infrastructure in TFSA or RSP? I believe they do their accounting in US dollars so I wasn’t sure if that would trigger a Canadian witholding tax. It’s one of a few Canadian companies that I’m looking further into as my next purchase.

    • Hi Jane,
      I own BIP.UN.TO (the Canadian-listed stock) in my TFSA account. I dont pay any withholding taxes whatsoever. Since the company has its financials in US$, and declares dividends in US$, the dividend amount each quarter is converted from US$ to CAD$ (but this is mostly because of my brokerage…I dont know if other brokers allow you to just hold the US$)

      Hope that helps
      R2R

  2. I like your thought process R2R. I’m not finding much value at the moment. I’m standing by my Berkshire bet from the beginning of the year though 🙂 A few small insurance companies and a few commodities are all I see that’s positive. Still holding my cash and waiting this out. unfortunately, today’s US jobs report will push the Fed off of a summer rate increase. It’s a pity, because assets need to reprice….but I’ve been thinking that for well over a yeah. haha

    Have a great weekend buddy. Free to chat Sunday afternoon if you’re game
    -Bryan

    • Thanks for sharing your ideas, Bryan. Im having a hard time justifying investing in any insurance company in this low rate environment. Yes, there are some good value plays available, but I fear that it might turn into a value trap. Any increase in interest rates will probably be short lived.
      As we’ve spoken, Im more interested in hard assets these days – precious metals have really caught my interest and have been putting some money to work there.

      We are having some friends over on Sunday afternoon. Lets catch up next week?
      R2R

  3. Roadmap,

    It sounds like Canada and Houston share a lot of economic problems. The oil bust has finally started hitting people pretty hard around here. Like you I am heavily in cash at the moment and welcome a slight recession to bring stocks back to more reasonable levels. I wouldn’t mind adding some munis as well, but they too are in the stratosphere. Patience, patience, patience. 🙂

    MDP

    • The oil industry seems to have wrecked a havoc more in Alberta than other places. The rest of the country is just continuing ok for now. The fall of oil and the crash in Alberta has brought down our Canadian dollar, but the eastern provinces are loving it, since it helps the manufacturing sector.

      Hoping to get some better entry prices. Cant justify buying much these days.
      Thanks for stopping by and sharing your thoughts
      R2R

  4. Thanks for sharing your outlook Sabeel. Today’s jobs report was absolutely atrocious but since unemployment is “only” 4.7% we might as well raise rates now and get a head start on crashing the system… This illusion of a rapidly “improving” economy is a farce and will eventually be exposed for what it really is.

    I think you’re right on the mark, hard assets are where you want to be at this time. I have no confidence in most everything else right now…

    All the best!

    • The falling unemployment rate is a complete joke. Its not like they are even trying to hide the fact that ppl have stopped looking for a job and they dont count. Mainstream media keeps the narrative up saying that we are at full employment. Tell that to the folks who cant pay their bills and living on food stamps. What a farce.

      Hard assets are where I will be moving more of my money to. Like you, I dont have any confidence in the system.
      R2R

  5. Great points R2R. I’ve been thinking of doing the same thing you’re doing; selling off some weaker positions to hold cash for the next dip. It’s coming and I want to be ready for it.

Leave a Reply

Your email address will not be published. Required fields are marked *