Recovery predicted for investors

The chief portfolio strategist for TD Waterhouse said he expects people shouldn’t be as concerned for a double-dip recession.

The chief portfolio strategist for TD Waterhouse said he expects people shouldn’t be as concerned for a double-dip recession.

Robert Gorman, who was in Penticton recently for a seminar, said he sees a recovery happening, not a relapse like many fear.

“Where the stock markets around the world have done very well the last couple of years, particularly last fall through the end of February, they have faltered the last several months out of concern that you would have this double-dip recession and that of course would affect companies profits and their share prices. We think this is a correction and as people start to worry a little less about that double dip recession we think things will actually start to recover and we will end up doing pretty well for the year,” said Gorman.

He said Canadians have uncertainty in the market. This has left people, more so seniors, putting money to the side. And, Gorman says cash is a very poor performing asset.

Those who don’t want to have stock market exposure and don’t have a tolerance for volatility could look into high-quality corporate bonds issued by Canada’s largest and best companies. Gorman said corporate bonds pay a higher stream of income than government issued bonds and they tend to be shorter in their term of maturity.

“A higher stream of income and less risk. The numbers aren’t fabulous, but it sure beats a half per cent,” said Gorman.

The next thing he suggests over holding onto cash is preferred shares. The attraction being is they generally pay a pretty high stream of income — dividends. These are eligible for a dividend tax credit.

“It makes every dollar of Canadian dividends like getting roughly $1.30 in interest after tax. There are other issues there and you have to be careful about which ones you buy, so that is why you would want to have an advisor like Andrew McLean here at TD in Penticton in your corner, but it’s another option,” said Gorman.

The third option is one he believes will be strong for the coming decade.

“What are seniors looking for, either if they are retired now or are going to be? They are looking for a fairly high stream of reliable income, in an ideal world that income would go up to protect against inflation and the value of their capital go up over time. That is the very definition of the dividend growth stock. I think a well-chosen dividend type portfolio, is a very good spot for some portion of a seniors portfolio,” said Gorman.