Where to find the scariest numbers in investing. Plus, why utility stocks have been in the dumps

In a year when very little is going right in a financial sense, the summer rally in the bond market seemed to offer some hope for better times to come.

You can now file that hope under D for done like dinner. The bond market has resumed a plunge that has taken the FTSE Canada Universe Bond Index down 13.5 per cent for the year through mid-October. For now, bonds are a scarier asset than stocks.

I like to focus on the five-year Government of Canada bond in gauging what’s happening in the fixed income market because it’s a middle ground between short- and longer-term bonds and because it influences five-year mortgage rates. The five-year Canada bond yield recently hit a high for the year of nearly 3.7 per cent, which compares to 1.25 per cent at the end of last year.

The five-year Canada bond yield got up to 3.56 per cent in June, then settled back down to about 2.65 per cent through July. It looked back then like financial markets were in an optimistic frame of mind about inflation easing and interest rates plateauing before eventually declining.

The bond market has since re-embraced a more gloomy outlook about inflation and rates, which has meant a drop in bond prices. As bond prices fall, yields rise (and vice versa). Higher yields are good news if you have new money to invest in bonds or guaranteed investment certificates. But if you’ve owned bonds or bond funds for a while, you’re getting hammered. More downside is possible.

The S&P/TSX Composite Index is down about 10 per cent for the year, which is alarming but not exceptional by historical standards. The decline for bonds is unprecedented in the modern investing world and especially unnerving because bonds are supposed to stabilize portfolios when stocks fall. Bonds aren’t delivering today because of rising inflation and rates.

Investment returns for what once were considered prudently diversified investment portfolios are on track to look pretty bad for 2022. It’s too late to sell bonds now – doing so is a reaction to what we’ve already seen, rather than smart preparation for what’s ahead. Potential safe havens for unnerved investors include guaranteed investment certificates and exchange-traded funds or mutual funds holding deposits in high interest bank accounts.

If you have a long-term focus, it’s also time to consider whether buying low applies to the bond market, as well as stocks. A bond ETF tracking the broad Canadian bond market yields about 4.3 per cent right now, compared to 2.4 per cent in the spring. When inflation fades and rates eventually edge back down, 4.3 per cent will look good.

— Rob Carrick, personal finance columnist

This is the Globe Investor newsletter, published three times each week. If someone has forwarded this e-mail newsletter to you or you’re reading this on the web, you can sign up for the newsletter and others on our newsletter signup page.

Stocks to ponder

Topaz Energy Corp. (TPZ-T) Calgary-based Topaz is a royalty and energy infrastructure company that was created in 2019 as a spin-off of Tourmaline Oil Corp. The company provides both growth and income to its shareholders, with a dividend yield topping 5 per cent. The stock has a unanimous buy recommendation from 14 analysts with an average target price of $30, implying a potential price return of nearly 40 per cent. Jennifer Dowty looks at the investment case.

The Rundown

Are we on the brink of another financial crisis?

Investors have plenty of reasons to worry: U.S. core inflation recently hit a four-decade high; British Prime Minister Liz Truss fired her treasury chief, spurring more instability in government debt markets; Royal Bank of Canada warned that Canada should brace for a recession that could start within months. And those are just a few of many. But does it add up to a financial crisis? Ian McGugan shares his insight and considers what may be the best course of action for investors.

Also see: Hedge funds still betting on that elusive Fed pivot

Stocks or ETFs? What’s the best long-term choice for a dividend investor?

Which is likely to produce a better return over time: owning ETFs or individual stocks? This question was posed last week by a 50-year-old reader who described himself as a “medium risk” investor. He’s operating with a 10-year time horizon and wants to focus on both price appreciation and dividends. He also wants to know if there are sectors that offer better deals right now – he mentions banks, healthcare, energy, and tech. Gordon Pape provides some guidance.

What Mackenzie Investments’ Katherine Owen is buying and selling

One of the best investment decisions money manager Katherine Owen made over the past year was getting back into the energy sector. The portfolio manager at Mackenzie Investments in Toronto says the team she works with sold out of energy in early 2020, just before prices started to drop amid the global pandemic lockdowns that dried up demand for oil and gas. The team started buying energy names again last year, believing the industry was well-positioned to reap huge profits from the latest rebound. Ms. Owen, who helps oversee about $11-billion in assets with the global equity and income team at Mackenzie Investments, tells Brenda Bouw what she has been up to more recently

Market turbulence has claimed utilities as an unlikely victim. Maybe that’s good news

This year’s stock market turbulence has claimed another victim: utilities. What has gone wrong with the sector widely deemed safe from economic uncertainty? David Berman has some answers.

A retired couple wanted out of the stock market. Then, a bank fumbled their account transfer

Rob Carrick tells a story that highlights what seems to be a growing problem in the investing industry: In a volatile financial world, account transfers can leave your investments in limbo for weeks and even months. Some in the industry say transfers lately have been slower than ever.

Others (for subscribers)

The most oversold and overbought stocks on the TSX

Monday’s analyst upgrades and downgrades

What Som Seif learned from buying his first stock – and selling it ‘basically at zero’

Globe Advisor

Looming recession a tailwind for gaming as consumers look for ‘cheap’ entertainment

Are you a financial advisor? Register for Globe Advisor (www.globeadvisor.com) for free daily and weekly newsletters, in-depth industry coverage and analysis, and access to ProStation – a powerful tool to help you manage your clients’’ portfolios.

Ask Globe Investor

Question: My husband was a big fan of John Heinzl’s columns, and by following his buy-and-hold approach he did very well for us. After I received a $3-million inheritance seven years ago, he invested the money in dividend growth stocks – primarily banks, utilities, telecoms and pipelines – and the portfolio’s value has grown to more than $6-million. Sadly, my husband passed away recently. Also, the adviser my husband was using retired, and the new adviser has dramatically increased the fees to about $30,000 annually (0.5 per cent of the assets), up from $6,000. The previous fee seemed reasonable, since my husband made all the decisions and did virtually no trading. My son, who has more investing experience than I do, says he doesn’t know why we are paying $30,000 to basically “park” our money. One of our concerns is how we would transfer our investments to another adviser or institution. The new broker asked to meet with us recently but it was too soon after my husband passed away – I was numb. Do you have any suggestions?

Answer: I completely understand your reluctance to pay tens of thousands of dollars for the privilege of collecting your dividends on a buy-and-hold portfolio. I also understand you’re not ready to sit down with the new adviser or make any major financial decisions so soon after your husband passed away. Many people in your situation feel the same way.

This question requires a more detailed response than usual, and you can check it out here.

–John Heinzl

What’s up in the days ahead

Brenda Bouw finds out the latest market views of Capital Group’s Kathrin Forrest.

Click here to see the Globe Investor earnings and economic news calendar.

More Globe Investor coverage

For more Globe Investor stories, follow us on Twitter @globeinvestor

You may also be interested in our Market Update or Carrick on Money newsletters. Explore them on our newsletter signup page.

Compiled by Globe Investor Staff