Plus: Why home prices might go up, again September 23, 2024 Sign Up | View online IN THIS ISSUE 7 min read 🎯 Tiff hits his target 🥅 Rogers swallows sports 👟 Nike nixes its new guy Nike seems to have forgotten an important lesson: it’s gotta be the shoes. We explain below. THE WEEK IN MARKETS The TSX is a tortoise Much like the fable about the tortoise and the hare, we spent all summer gasping over how fast U.S. stocks (the hare) kept zooming up while Canadian companies (the tortoise) got left in the dust, just as they did in the summer of 2023. By the end of June 2024, the tech-heavy U.S. S&P 500 was already up almost 18% on the year, while hardly anyone paid attention to the TSX as it inched along at a slow but steady +5% YTD. Well, don’t look now, but here comes the tortoise. Emboldened by falling inflation, interest-rate cuts (see below), and decently rosy economic expectations, investors are now buying a broader set of companies beyond just the U.S. giants, and Canadian stocks keep gaining ground as a result. Last week, the TSX closed at a record high and is now up 14% for the year. Yes, it’s still lagging behind the S&P 500 (+20% YTD). But at least now we’ve got ourselves a footrace. THE WEEK IN ONE NUMBER 0.5% The U.S. Federal Reserve’s first jumbo rate cut, which will bring borrowing costs down to around 4.75% to 5%. What about Canada? Keep reading… WHAT HAPPENED LAST WEEK IMPORTANT The Bank of Canada hits its magic number. Two percent inflation: it’s been the central bank’s motivating goal behind two-plus years of economy-slowing rate hikes, and we’re finally here. Now for the tricky part: making sure the slowdown doesn’t turn into a recessionary stall. Staying out of that ditch is why the Bank of Canada will likely cut interest rates fast; they’re expected to fall from 6% earlier this year to 2.25% by this time in 2025. If mortgage rates mirror central-bank rates, that could put a lot of money back in peoples’ pockets: for a $750,000 home with 10% down, your monthly payment would drop from $4,450 (at 6%) to $3,000 (at 2.25%). Speaking of homes… Buying a house gets (a teensy bit) easier. Last week, Ottawa unveiled what it’s calling “the most significant mortgage reform in decades.” The two changes: (1) letting people take on longer mortgages, which will lower their monthly payments but ultimately leave them paying more in interest, and (2) raising the cap on mortgage insurance to enable more people to buy pricey homes with a down payment below 20%. The policy changes will, in theory, make it easier for some prospective buyers to afford a home, but real-estate prices might rise more as a result; realtors say the reforms are already stoking demand. The nut the government hasn’t yet cracked is how to improve affordability while lowering demand. And there’s really only one way to do that: build a lot more homes, and fast. INTERESTING The cool kids are no longer feeling Nike. A recent feature in Bloomberg blamed one guy — CEO John Donahoe — and evidently the shoemaker agreed, because last week it kicked Donahoe to the curb. The gist is that Donahoe, a tech exec who knew lots about servers and little about shoes, was hired in 2019 to help Nike improve its margins. So he cut jobs, cut product development, and cut retail partners, but he also cut out the shoemaker’s innovative soul. He flooded the market with endless variants on familiar, and tired, hits — e.g., the Panda Dunks — while upstarts like Hoka stole away customers with higher-performance wares. As a result, Nike lost US$40 billion, with a b, in market value. Donohoe’s replacement? A Nike veteran/former intern. Investors loved the pick: Nike shares spiked by 10% on the news. Rogers completes a Toronto sports sweep. The family-run cable-and-telecom giant already owned MLB’s Blue Jays, but, after acquiring a 75% stake in Maple Leaf Sports & Entertainment, Rogers now has a monopoly on major pro sports in Toronto. Its empire now includes the Maple Leafs (NHL), the Raptors (NBA), Toronto FC (MLS), and the Argonauts (CFL). Industry experts speculate that Ed Rogers, chairman of the Rogers organization, might not be done with his sports splurge: his next quest could be creating an NFL franchise for Toronto, which, if he’s successful, would be the first team outside the U.S. “He’d be the largest sports owner in the world,” one insider told Sportsnet. “It would be his legacy.” —Sarah Rieger FROM OUR SPONSOR THE FOMO INDEX by Stacey Woods IMPORTANT 😎 Snapchat’s new selfie feature could automatically put your face in ads. So that’s why everyone keeps calling you “Trojan Man.” Source 🫙 Tupperware declares bankruptcy. Going to send what’s left of itself home in some GladWare. Source 🏠 Study shows B.C. rents down since Airbnb ban. Meanwhile, hosts struggling to unload all those “Live Laugh Love” signs. Source 🍕 NYC Pizza Huts will print résumés on pizza boxes for job seekers willing to work somewhere that would order Pizza Hut in NYC. Source CRASH & BURN TO THE MOON 🥶 Army’s new sleeping bags aren’t warm enough for Canadian winters. But soldiers say they work just fine for slumber parties. Source 💸 California man unknowingly pays neighbour’s utility bill for 18 years. Neighbour could at least return his jumper cables. Source 📺 After losing Food Network and HGTV, Corus launches Flavour Network, Home Network. Look for new shows, Steel Chef and Property Cousins. Source 🐿️ Squirrels bring train to a standstill before anyone gets to say, “I’ve had it with these %$#@& squirrels on this %$#@& train!” Source WHO CARES THE BIG IMPORTANT STORY TRADING The Big Stock Market Lesson of 2024? Don’t Freak So, as we said up top, stocks have risen a whole lot this year, and not just the TSX and S&P 500, either: stocks globally are up about 21% since January 1, which is well above the 10% or so you’d normally expect. What’s interesting is that these big returns have come despite a lot of scary stuff in the news: conflict in the Middle East, the war in Ukraine, rising tensions in the South China Sea, plus concerns about China’s economic slowdown, inflation perhaps surging again, and the profitability of AI. In other words, there were plenty of moments when it might have seemed smart to hit the eject button to dodge a stock downturn. But doing that would have meant missing out on this year’s healthy returns. Here’s the thing, though: this year hasn’t been an outlier, spooky-things-wise. The stock market has basically been in one long bull market since 2009. But along the way, there have been hundreds of rational-seeming reasons to get scared and sell your shares, as this chart recently reminded us (you can see part of it below). And the same will surely hold true in the future (which is why we want to talk about it). But, if you’re a diversified, long-term investor, staying put is almost always the right move, even if the doomsayers are occasionally right, as they’re bound to be sooner or later. Why? Keep scrolling. Panicking even for a little bit can cost you lots of money Why? Because stock gains aren’t evenly distributed. There are often a lot of boring, low-action days (or weeks or months) in a row and then — bam! — a great day will come along and stocks will surge. The trouble is that no one really knows when these red-letter days will appear, and history suggests that you sure don’t want to miss them. If you do, your returns will likely be far worse than if you had held your shares through market turbulence. Check out this chart: THE UPSHOT: We live in a scary world with a lot of unknowns, and markets, now as ever, are volatile. Of course, it would be super if you could accurately predict the future, exit the market right before a big downturn, and then savvily reinvest right as stocks hit their nadir and begin to recover. But that’s really hard to do. Studies have shown that individual investors who panic sell during downturns tend to jump back in after the market has already recovered and risen a bunch, which is a good way to miss out on banner days. That’s why many personal-finance pros suggest doing the most boring thing possible: accept that timing markets is hard, make sure you have enough cash in the bank so you don’t need to sell if markets take a dive, and stick with your plan — even if that means refusing to open your brokerage app for a while. —Jared Sullivan OTHER VERY GOOD READS 🤳 Mr. Beast’s Leaked Memo is a Guide to the Gen Z Workforce How the most successful YouTuber thinks about leadership. | Kyla’s Newsletter 🫖 Downton Abbey with NDAs* How to be a butler to the super-rich. | 1843 Magazine 🧳 Why Do National Parks Turn Us Into Maniacs? A trip into the heart of tourist-season bad behaviour. | Outside *Article is paywalled, which, yeah, is kind of annoying. But we think good journalism is worth paying for. POSTS OF WISDOM Turns out, Tupperware was not a generic name for “plastic storage thing we always forget about in the back of the fridge.” THOUGHTS ON TODAY’S ISSUE? Love it Good So so This week’s newsletter contributors: Ben Mathis-Lilley (writer), Devin Gordon (writer), Stacey Woods (writer), Sarah Rieger (news writer), Ambrose Martos (fact checker), Ciara Rickard (copy editor), Clare Douglas (copy editor), Sara Black McCulloch (fact checker), Tyler Hamilton (senior lifecycle manager), Matthew Karasz (markets editor) Jared Sullivan (senior editor), Peter Martin (senior editor), Kat Angus (managing editor), and Devin Friedman (editor-in-chief). Wealthsimple Media Inc. 80 Spadina Ave Suite 400 Toronto, ON, M5V 2J4 VIEW IN BROWSER PRIVACY POLICY UNSUBSCRIBE TLDR is offered by Wealthsimple Media Inc. and is for informational purposes only. Any views expressed are those of the individual author and/or of Wealthsimple Media Inc., not of Wealthsimple Financial Corp or any of its other subsidiaries or affiliates. The content in TLDR is not investment advice, a recommendation to buy or sell assets or securities, nor any other kind of professional advice. 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