Plus: Elon wins the charging war June 12, 2023 Sign Up | Made in Canada IN THIS ISSUE 8 mins read 🥽 Apple for eyeballs 👮 Charges for crypto 🤑 Investing for idiots geniuses TLDR’s mascot, Billie, already loves Apple’s new mixed-reality headset. Will anyone else? | Wealthsimple THE WEEK IN MARKETS If you stand back far enough, 2023 looks thus far to be one hell of a year for the stock market. Some indices are faring better than others, of course. The S&P 500 is up 12% YTD; the Nasdaq: almost +33%; and the TSX is trailing at +2.5%. What’s interesting is that basically one thing is driving the rally: big tech. See the chart below for proof. This tech surge has been fueled by optimism over rates; earnings; people’s willingness to pay for various products (iPhones, computer chips); and, of course, AI. Which has a lot of people wondering: will the stock rally last or evaporate if the tech vibes shift? The answer will hinge on whether the future lives up to investors’ expectations about these factors. The one thing that’s clear right now is that big tech remains a big driver of the markets overall, and that doesn’t look to change anytime soon. CHARTS! Seven Big Boats Are Raising the Market Tide The S&P 500 is up more than 11% for the year, but, if you take out the seven highest-performing stocks, it’s up … er, zero. Yes, it’s basic math that biggest companies = biggest returns. But it seems like the sentiment around these companies is making the entire market look more bullish than it might be. If the narrative around big tech changes, things could get bear-y — fast. WHAT HAPPENED LAST WEEK IMPORTANT The rate-hike pause is over. After a wonderfully boring five months spent waiting to see if the economy responded to previous hikes, the Bank of Canada surprised the markets by raising rates by ¼ point on Wednesday. Tiff and his crew blamed inflation (which stopped falling), the economy (which kept growing), and spending (which we all kept doing). There was one sign that things weren’t as strong as they thought, but it came too late to help: fresh employment numbers showed we lost 17,000 jobs in May (instead of gaining 20,000, as expected). If we see more data like that, Tiff may have to adjust his plan yet again. The SEC came for Binance! And Coinbase! And maybe everybody else? After so much equivocating, the U.S. regulator went for crypto’s throat on Monday, finally accusing Binance and Coinbase of running illegal securities exchanges — and forgetting the cardinal rule of never putting the incriminating stuff in writing. Binance.US suspended USD deposits in response, and Robinhood dropped Cardano, Solana, and Polygon. If most cryptocurrencies are deemed securities, crypto faces a choice: kowtow to consumer-protecting requirements or leave the U.S. and perhaps other, ahem, Timbit-loving countries that already have regulations in place. INTERESTING Apple wants us all to wear digital ski goggles. Barely six months after AI took over as the most-hyped tech of the future, the world’s most valuable company launched its take on … last year’s tech of the future, VR. And it made it expensive: the new Apple Vision Pro will cost US$3,499 when it launches early next year. But! It’s Apple, which somehow convinced everyone to wear a smartwatch, so it can succeed where Meta, HTC, Magic Leap, Microsoft, and Google couldn’t, right? Investors think so, at least. $AAPL ended the week at all-time highs. Driving an EV is about to get a little more eas-y. On Thursday, GM announced it’ll join Ford in using Tesla’s charging design, all but guaranteeing two things: a universal standard that will be nice for drivers and a lucrative revenue stream that will be nice for Elon. The stock revved up on the news, jumping 7% for the day and bringing this year’s gains to an eye-popping 126%. Did you see Nick Taylor’s putt? The B.C. golfer absolutely drained a 72-footer in a playoff to win the RBC Canadian Open. He’s the first homegrown champ since 1954. Seriously, just watch the video. FROM OUR SPONSOR THE FOMO INDEX by Stacey Woods IMPORTANT 🪧 Hollywood actors might soon strike with WGA writers since they’re out there taking selfies with them anyway. Source 😁 Japanese youths are taking lessons to learn how to smile in a post-COVID world, as if anyone’ll need to. Source 🫁 New once-a-day pill found to cut risk of dying from lung cancer in half. Imagine if you took it twice! Source 🦆 Apple iOS finally accepts that nobody ever means to write “ducking” and will stop autofilling it all the clucking time. Source CRASH & BURN TO THE MOON 🕹 GameStop stock tumbles on news of CEO firing. Now’s your chance to buy the whole thing. Source 💳 Drake’s credit card was declined during a livestream, but he swears he put more money on it after the Super Bowl. Source 💊 A pill version of Ozempic will be out soon, which should hold everyone over until it comes in a drip. Source ☕ Timmy’s got this one: Tim Hortons is launching a credit card you’ll be proud to whip out anywhere. Source WHO CARES WHAT’S UP THIS WEEK New U.S. inflation numbers! (Tuesday) Hopefully, our neighbours can keep the downward trend going. The Fed announces its next rate decision (Wednesday). If Powell follows Tiff’s lead (the markets give it a 22% chance), this beautiful tail finally gets to wag the dog. DON’T BE A TLDR HOG 🤝 Like TLDR? The first five million people to click this link can share it with a friend for free. (Don't like TLDR? Afflict it on an enemy! We'll appreciate you either way.) THE BIG IMPORTANT STORY INVESTING Investors Love This Long-Term Investment Strategy. Is It Broken? For at least a century, one of the bedrock strategies of long-term investing has been something called the 60/40 portfolio. The concept is simple: you allocate about 60% to stocks and about 40% bonds. If you have a money manager, there’s a strong chance your portfolio is structured sort of like this, with more stocks when you’re young and more bonds as you get old. The 60/40 allocation isn’t right for everyone (no allocation is), but many long-term investors like it because it has worked in mostly predictable ways for decades. Until last year. In 2022, 60/40 portfolios lost about 20%, their worst showing since the Great Depression. The performance was so dismal that in January of this year, Goldman Sachs wondered whether “the 60/40 might be dead.” Such proclamations, not to mention that 20% plunge, have led some investors to wonder if the time has passed for the old strategy? Because it’s such a foundational question for investors, we investigated: is this oldie still a goodie? What the 60/40 is supposed to do The basic idea behind the 60/40 is that stocks offer high returns over time but can suffer in crises and take years to recover. Bonds, meanwhile, offer predictable coupon payments and usually rise in value when stocks fall. Altogether this means that with a 60/40, your money usually does a little less well when the market is up but also a little less bad when the market is down. Ol’ reliable. Then last year happened To combat out-of-control inflation, central bankers quickly raised interest rates, which hammered stocks and turned investors into cash-hoarding dragons who saw rising savings rates and thought, Who needs bonds? Hence the 60/40’s awful performance. But, even with last year’s showing (plus Brexit, COVID-19, and the war in Ukraine) 60/40 portfolios have done well over the past five years, returning 31%, or 5.55% annualized. So, how has the 60/40 fared this year? With stocks and bonds both up, the classic allocation has absolutely roared back from its 2022 nadir, bouncing up 7% from January through April. So, a complete reversal. In the chart above, we compare the 60/40 to a high-interest saving portfolio, because one of the world’s trendiest investments right now is even older than the 60/40. It’s called … cash! Money-market funds, high-interest saving portfolios, and other interest-bearing cash accounts are earning upwards of 5% — the highest rates in a decade. This has triggered a big shift from stock portfolios to cash. But the chart above shows that the investors who bailed on their long-term plans and put their money in savings missed out on an impressive rebound. Don’t get us wrong: it’s certainly a good idea to keep cash in savings if you need money soon, and we’re not advocating for any particular allocation, because we don’t know the future. But, if you’re looking for evidence that high rates mean the 60/40 no longer works, you won’t find it in this year’s returns so far. Will the 60/40 keep working in the future? OK, so savings rates and the rates on interest-bearing cash accounts are high right now. But will they stay that way or go down? And will 60/40 portfolios perform as they have in the past? These are good questions. We wish we could give you definitive answers. But here’s one important thing to keep in mind: investing would be pointless, and business activity would largely cease, if whatever assets investors bought didn’t outperform cash in the long run. In fact, the government tries to make sure riskier investments outperform cash, to spur economic growth. That’s why a diversified portfolio of stocks and bonds, etc., has traditionally been the best way to build wealth over time all the way back to 1900 or so. So, it’s no big surprise that asset managers like BlackRock (whose numbers we crunched above) project that 60/40s will continue to work just fine, returning as much as 32.5% over the next five years, or about 5.8% a year, compared to the 17%, or 3% a year, return you might get if you kept your money in cash (or cash equivalents, like Treasury bills). But, if the markets do endure another brutal 2022-style downturn, remember how quickly things can rebound. —Jared Sullivan and Sarah Rieger OTHER VERY GOOD READS 🍁 Is CanCon obsolete? Nobody’s happy about what constitutes “Canadian content” | The Walrus 💔 How to Break Up Financially When You Break Up It’s not just about splitting the record collection | Wealthsimple 🧼 The Explosive Legacy of the Pandemic Hand Sanitizer Boom* A noxious brew of leftover product is catching fire and making people sick | Wired *Article is paywalled, which, yeah, is kind of annoying. But we think good journalism is worth paying for. THE WISDOM OF TWITTER Hot tip: if you’re both bullish AND bearish, you never have to be wrong. THOUGHTS ON TODAY’S ISSUE? Love it Good So so This week’s newsletter contributors: Brennan Doherty (writer), Devin Gordon (writer), Stacey Woods (writer), Sarah Rieger (news writer), Ambrose Martos (fact checker), Ciara Rickard (copy editor), Nikki Holmes (copy editor), Sara Black McCulloch (fact checker), Jared Sullivan (senior editor), Peter Martin (senior editor), Kat Angus (managing editor), and Devin Friedman (editor-in-chief). Contributors to this newsletter own stock in Google. Wealthsimple Media Inc. 80 Spadina Ave Suite 400 Toronto, ON, M5V 2J4 Replies to this email address are not monitored. Have questions? Visit our Help Centre or submit a request to our Client Support team. 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. TLDR is not a research report and should not serve as the basis for making investment decisions. Wealthsimple Media Inc. does not endorse any third-party views referenced in this content. When you invest, your money is at risk and it is possible that you may lose some or all of your investment. Past performance is not a guarantee of future results. Historical returns, hypothetical returns, expected returns and images included in this content are for illustrative purposes only. Always research before investing. © 2023 Wealthsimple Media Inc.