This week, Cut the Crap Investing founder, Dale Roberts, shares financial headlines and offers context for Canadian investors.
It’s a pleasure to return to the “Making sense of the markets this week” column at MoneySense while Kyle Prevost enjoys a family holiday. Below I summarize the key market themes, recent data and what Canadian investors might consider as volatility continues.
The Fed tries to crush investors’ hopes
The dominant story remains central banks pushing interest rates higher to slow spending and bring inflation down. U.S. markets entered a bear market in June but rallied in August on hopes of a Federal Reserve pivot. Since then, markets have oscillated between sharp declines and rallies as investors reassess the odds that the Fed will ease off its tightening campaign.
The back-and-forth reflects a basic tug-of-war: when central bankers warn rate hikes will continue, market sentiment slips and stocks fall; when investors expect the Fed will slow the pace of hikes, markets rally. Over the past few weeks, a new uptrend has emerged, but the ride has felt like a roller coaster for many.
Fed officials have repeatedly stressed they still have work to do to bring inflation under control. Comments from regional Fed presidents and other policymakers have swung markets intraday on multiple occasions, fueling volatility as traders try to price the path for future rate moves.
The Fed says: “We’re raising rates.”
Markets fall in response.
Investors say: “We expect a pause soon.”
Markets rally on that hope.
The Fed minutes
The minutes from the Fed’s October meeting confirmed a shift in pace rather than a change in direction: officials signalled they would likely slow the size of rate increases from 75 basis points to smaller increments such as 50 or 25 basis points. That prospect helped push the S&P 500 back above 4,000 in November.
“A number of participants observed that, as monetary policy approached a stance that was sufficiently restrictive to achieve the Committee’s goals, it would become appropriate to slow the pace of increase in the target range for the federal funds rate.”
At the same time, many Fed officials warned inflation could remain stubborn, implying the terminal policy rate—the peak level of short-term interest rates—might need to be higher than previously expected. Fed projections released earlier in September pointed to a peak around 4.6% next year; the committee will update its outlook soon. Market pricing has leaned toward a 50 basis-point hike in December followed by smaller moves thereafter.
Wall Street is tentatively optimistic about a so-called soft landing. October’s strong market gains helped that view, but uncertainty remains and investors should be prepared for further volatility.
So what should investors do? If you’re accumulating wealth, sticking to a disciplined schedule of investing and staying within your risk tolerance is sensible. If you’re retired or close to retirement, make sure your portfolio can withstand market swings; consider balanced, all-weather models rather than trying to time short-term moves.
Earnings still trickle in
Earnings season is winding down but retail results have been notable. Consumers have been spending, in part financed by rising credit card balances, which raises questions about sustainability. One standout for Canadian investors was Alimentation Couche-Tard, which reported another solid quarter.
Couche-Tard reported revenue of CAD$4.1 billion, up 3.0% year-over-year, with same-store sales rising 5.6%. Net earnings were CAD$810.4 million for the quarter versus CAD$694.8 million the prior year, and adjusted net earnings were about CAD$838 million compared with CAD$693 million. The stock has held up well, up more than 24% over the past year and roughly 15% year-to-date.
The Twitter house of cards?
Probably the most talked-about corporate story this year involves Elon Musk’s purchase of Twitter. The headline valuation attached to the original USD$44 billion deal has been under intense scrutiny as the company faces advertiser departures, staffing upheaval and uncertainty over monetization strategy.
“How do you make a small fortune in social media? Start out with a large one.” — Elon Musk (tweet)
Musk reportedly cut a significant portion of staff and imposed new demands on remaining employees, prompting further departures. Advertising has traditionally been the core revenue source for the platform, and advertiser pullback amid concerns about content moderation has stressed the business model.
“The people have spoken. Trump will be reinstated. Vox Populi, Vox Dei.” — Elon Musk (tweet)
The coming months will test whether management and any new strategy can stabilize revenue and advertiser confidence. I’ll follow developments closely and report back.
What’s up with bitcoin and FTX?
The collapse of FTX and the turmoil around its founder have damaged trust in crypto exchanges and prompted calls for stronger regulation. Reports suggest assets are missing and that creditors and customers may recover only a fraction of their holdings. These failures are painful for investors who held funds on the platform.
It’s important to distinguish between crypto assets themselves and the exchanges or intermediaries that custody them. Bitcoin exists on a decentralized blockchain independent of any one company. The popular maxim remains true for self-custody: “not your keys, not your bitcoin.” Exchanges can fail or mismanage funds, but that doesn’t necessarily negate the underlying technology’s potential.
Bitcoin’s appeal to many stems from scarcity and a fixed supply. Some see it as a hedge against fiat currency debasement or financial instability. That said, crypto remains highly volatile and risky. Many Canadian investors gain exposure through exchange-traded funds that hold bitcoin with regulated custodians; firms often use third-party custodians such as Gemini, and those arrangements are subject to regulatory safeguards and insurance to varying degrees—but they are not risk-free.
Personally, I still hold allocations to bitcoin and ethereum alongside gold, gold stocks, materials and energy names as part of a diversified “all-weather” approach. Those positions suit my risk tolerance and time horizon, but they are not appropriate for everyone.
Buffett’s buffet of tweets
Recent social posts highlighted changes in Warren Buffett’s portfolio and his longest-held positions, which offer a reminder that thoughtful, long-term ownership remains a powerful investment philosophy. Watching what successful investors hold can provide perspective, but individual portfolios should be aligned with personal goals and risk tolerance.
Dale Roberts advocates low-fee investing and writes at cutthecrapinvesting.com. Follow market commentary on Twitter at @67Dodge.