Market Factors: Why the Fed is a risk for Canadian dividend investors

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Plus, why ETF investors may not be celebrating a notable shift in U.S. markets

In this edition we discuss how the loonie measures how independently the Bank of Canada can act, why index investors might get uncomfortable in the coming weeks and outline a great resource for bookworms.A screen on the trading floor at the New York Stock Exchange display a news conference with Federal Reserve Chair Jerome Powell following the Federal Reserve rate announcement, in New York City, U.S., September 18, 2024.

Canadian bond yields will stick close to U.S. yields whether the economic circumstances warrant it or not. In practical terms, the difference between domestic and U.S. five-year bond yields has averaged a scant 13 basis points over the past two decades, despite pandemic-related volatility. The equal weighted S&P 500 index has climbed 8.7 per cent since July 7, well ahead of the usual market cap-weighted benchmark’s 2.7 per cent. The trend signals a broadening of market leadership beyond AI-related tech favourites Microsoft Corp., Alphabet, Nvidia Corp., Meta Platforms Inc., Amazon.com and Apple Inc.

 

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