This week, we resume our ‘Tips for Those New to Investing’ series and take a look at how rising interest rates can shake up your stock portfolio.
What Rising Interest Rates Mean for Your Portfolio
Interest rates might seem like background noise, but they can have a big impact on your investments. When central banks, like the Bank of Canada (BoC) or the US Federal Reserve (Fed), raise rates, it is more than just a headline—it is a shift that ripples through your portfolio. Understanding how rising rates work can help you make smarter decisions with your stock picks.
Why Do Central Banks Raise and Lower Interest Rates?
Central banks hike rates to fight inflation. When prices rise too fast, higher rates make borrowing more expensive, cooling spending and investing. While this helps control inflation, it can also slow economic growth, which pressures businesses and investments.
On the flip side, when they lower rates, it is to jump-start the economy. Cheaper borrowing fuels spending and investment, supports job growth, and keeps inflation in check. Central banks use this strategy to give the economy a nudge during slowdowns or recessions.
How Rising Interest Rates Affect Stocks
When interest rates rise, the stock market can feel the heat. Higher rates mean borrowing costs go up, directly impacting companies that rely on loans for growth. Sectors like tech and real estate, which often need large amounts of capital for things like research or property deals, may slow their growth plans.
It is a bit like paying more interest on your credit card – you have less left over for things you want. 😊 For companies, that means less cash for reinvestment or innovation, which can weigh on their profits and stock prices.
Not all sectors feel the pinch, though. Financial companies, like banks and insurers, actually benefit from rising rates. They can charge more on loans, boosting their profit margins, so financial stocks often perform well when rates rise.
Higher rates also hit consumer spending, affecting retail and consumer goods stocks. With borrowing more expensive, people save more and spend less, cutting back on discretionary purchases like vacations or luxury items, which can shrink revenues in those sectors.
However, some stocks are more resilient when rates go up. Energy, utilities, and consumer staples – companies that sell essential goods and services – tend to hold up better. They have steady demand and can pass higher costs to consumers, making them less sensitive to rate hikes.
In short, while rising rates can challenge companies that rely heavily on borrowing, not all stocks are impacted equally. Knowing which sectors are more vulnerable and which stand to benefit can help you make smarter portfolio adjustments.
How to Navigate Rising Interest Rates as a Stock Investor
- Stay Diversified: Even with stocks, do not put all your eggs in one basket. A mix of sectors can help cushion your portfolio when rates rise.
- Focus on Fundamentals: Companies with strong balance sheets and less debt are better equipped to handle higher borrowing costs. Prioritize those.
- Watch Inflation: Rising rates often signal a fight against inflation. Sectors like energy or commodities tend to perform better when inflation is up.
Rising interest rates do not have to be bad news for your stock portfolio. By understanding how different sectors react, you can adjust your strategy and stay ahead. The key? Stay diversified, focus on strong fundamentals, and keep your eyes on the long game.
Next week, we will take a look at how falling interest rates affect us investors, but for now let’s see what happened this past week….
Items that may only interest or educate me ….
Canadian Economic news, US Economic news,
Canadian Economic news
This past week’s key economic data that the BoC considers when deciding whether to raise or lower the interest rate.
Canadian market volatility
Canada’s Volatility Index (CVIX) started the week at 11.74 and drifted lower, finishing at 10.12 by Friday’s close. This dip suggests that the market continues to be less anxious due to the certainty of the US presidential election and falling interest rates.
Tracked under the ticker VIXI on the Toronto Stock Exchange (TSE), the CVIX gauges how much market volatility investors expect. A reading below 10 points to a calm, stable market, while numbers between 10 and 20 signal typical market fluctuations with moderate volatility. But when the index climbs above 20, it is a sign of rising uncertainty and the potential for a bumpy ride ahead.
US Economic news
This past week’s key data points that the Fed considers when deciding whether to raise or lower the interest rate.
Consumer price Index (CPI)
The Labor Department’s Bureau of Labor Statistics released October’s inflation data, which came in as expected. Consumer prices rose by 0.2% for the fourth month in a row, while the annual CPI edged up to 2.6%, compared to September’s 2.4%.
Looking at the details ‘Used cars and trucks’ saw the biggest monthly jump, climbing 2.7%, while ‘Fuel oil’ dropped 4.6%. Over the past year, ‘Transportation services’ continued to soar, rising 8.2%, while ‘Fuel oil’ plunged 20.8% – the largest annual decline. On the housing front, something that affects everyone, ‘Shelter’ costs, which include rent and mortgage payments, rose 0.4% in October, doubling September’s 0.2% gain, while shelter costs were up 4.9% year over year, maintaining the same pace as in September.
Core CPI, which excludes the more volatile energy and food components, rose 0.3% for the third consecutive month, in line with expectations. On an annual basis, core inflation remained steady at 3.3%, matching both September’s figures and analysts’ forecasts.
While inflation ticked up slightly year over year, there were no surprises in this report. With inflation still on track toward the Fed’s 2% target, this data boosts the likelihood of an interest rate cut in December, as Fed officials have grown more confident in their inflation outlook.
Retail Sales
The Commerce Department’s Census Bureau released its advanced estimate for October retail sales, reporting a 0.4% monthly increase. This follows a revised 0.8% gain in September – double the initially reported 0.4%. October’s numbers also edged past analysts’ expectations of a 0.3% rise, showing that consumer spending remains steady despite economic headwinds. On a year-over-year basis, retail sales rose 2.8%, building on September’s 1.7% growth.
Looking closer at the data, ‘Electronics & appliance stores’ took the spotlight with a 2.3% monthly increase, while ‘Miscellaneous store retailers’ posted the sharpest drop, down 1.6%. On an annual scale, spending at ‘Nonstore retailers’ – think online shopping – soared by 7.0%, while spending at ‘Gasoline stations’ dropped 7.1%, likely reflecting relief at the pump from lower fuel prices.
Core retail sales, which exclude the more volatile categories like motor vehicles and gasoline, nudged up 0.1% in October. Annually, core sales rose 3.8%, bolstered by reduced gas prices and steady spending on everyday essentials.
This report underscores the enduring strength of the American consumer, who continues to spend even in uncertain times. With strong retail sales in September and October, another solid quarter of economic growth is likely on the horizon. However, the strong retail sales may leave the Fed with less room to manoeuvre – potentially delaying a third and final interest rate cut for the year.
American market volatility
The CBOE Volatility Index (VIX), also known as the market’s “fear gauge,” opened the week at 15.00, dropping sharply to the 14-point range following the release of the latest inflation data, and continued downward before spiking higher at the end of the week to 16.14. Stronger than expected retail sales indicating a strong economy, created uncertainty for a December rate cut. The markets do not like uncertainty.
For some context, the VIX tracks expected market volatility over the next 30 days. When it is below 12, it signals a calm market. Readings between 12 and 20 reflect normal market swings. But once the VIX climbs into the 20-30 range, it indicates increased investor anxiety. Anything above 30 typically means the market is stressed, often a precursor to major turbulence or even a crisis.
Weekly Market Review
Monday: the post election rally continued as the Toronto Stock Exchange Composite Index (TSX), the S&P 500 Index (S&P), the Dow Jones Industrial Average (DJIA), and the Nasdaq Composite Index (Nasdaq) all ended in the green. Oil prices dropped after investors were not impressed by China’s latest economic measures to stimulate the world’s second largest economy.
In Canada, the TSX continues to ride the tailwinds of the US rally. In trading, the Technology sector rose the most, while Basic Materials (miners and fertilizer manufacturers) dropped the most by a wide margin.
In the US, the S&P hit 6,000 for the first time, while the DJIA closed above 44,000, with all three major indexes reaching record highs as investors continued to pour into stocks expected to benefit from the incoming administration’s economic policies, including tariffs, deregulation, and tax reforms. In trading, Consumer Cyclicals was the big winner, while Technology lost the most.
Tuesday: the markets took a breather in the US, with all three major indexes pulling back, while the rally in Canada continued. Investors are now eagerly awaiting tomorrow’s US CPI inflation report to see if inflation continues to ease, potentially paving the way for another rate cut in December.
In Canada, the TSX climbed to another record close, largely on the strength of Shopify (TSE: SHOP) which saw its share price jump 21% on the strength of earnings which beat expectations, and raising their fourth quarter growth estimates. In trading, the Technology and Consumer Staples sectors were the only ones to advance, with Basic Materials suffering the biggest drop.
In the USA, investors took some profits after the weeklong election rally as analysts think about whether the new administration’s upcoming policies could reignite inflation. In trading, Communication Services gained the most, while Basic Materials lost the most.
Wednesday: It was a mixed day for the markets, with the TSX and DJIA posting gains, the S&P was flat, and the Nasdaq slipped into the red. US inflation data came in as expected, keeping the Fed on course for another 0.25% rate cut. Meanwhile, oil prices edged higher despite OPEC downgrading its global demand forecast for the next two years.
In Canada, the TSX hit yet another record high, driven by rising oil prices and increased expectations of a US rate cut. In trading, Technology led the sectors, while Basic Materials lagged.
In the US, investor confidence grew with inflation data meeting expectations, reinforcing hopes of a rate cut. In trading, Consumer Staples posted the biggest gains, while Communication Services saw the biggest decline.
Thursday: the post election rally seems to have stalled, at least in America where all three indexes lost ground. Oil prices edged higher after a run on US oil supplies.
In Canada, the TSX bucked the downward direction of the US indexes and posted a record high close on the back of higher prices for energy companies. In trading, the Energy sector increased the most, while the Technology sector suffered the biggest decline.
In the US, weighing on the markets were comments from Fed Chair Jerome Powell who said the Fed was not in a rush to lower interest rates, lowering the odds of another rate cut this year. In trading, the Energy sector posted the biggest gain while Industrials recorded the biggest loss.
Friday: all four indexes sank after investors digested yesterday’s comments from the Fed cautioning that they are in no hurry to lower rates. Oil prices tumbled as weaker demand from a sluggish Chinese economy weighed on the market.
In Canada, concerns about the US rate cuts being paused caused the TSX to give back much of the gains made earlier in the week after. In trading, Utilities and Consumer Cyclicals were the only sectors to register a gain, while the Healthcare sector dropped the most.
In the US, the post election rally lost more steam after higher-than-expected retail sales data cast doubt on the need for another rate cut this year. As a result, investors decided to take some of their gains off the table. In trading, the Utilities sector rose the most while the Technology sector fell the farthest.
Weekly Market and Portfolio Review
For the week, the TSX (SPTSX) rose 0.5%, the S&P 500 (SPX) fell 2.1%, the DJIA (INDU) dropped 1.2% and the Nasdaq (CCMP) declined 3.1%.
| Index | Weekly Streak |
| TSX: | 2 – week winning streak |
| S&P: | 1 – week losing streak |
| DJIA: | 1 – week losing streak |
| Nasdaq: | 1 – week losing streak |
The markets stumbled this week as the post-election rally lost steam, weighed down by concerns that the Fed might delay its next interest rate cut. After an initial boost fueled by election optimism and the prior week’s rate cut, momentum waned midweek before the rally unraveled by Friday, as shown in the weekly progress chart above.
Investors initially cheered Donald Trump’s election win, widely viewed as pro-business, but the focus soon shifted to the Fed. Fed Chair Jerome Powell highlighted that with strong economic growth, a robust job market, and inflation still above the 2% target, there was little urgency to lower rates further. This cautious tone deflated the enthusiasm that had propelled Wall Street to record highs, resulting in the worst weekly market performance in over two months.
In Canada, the post-election rally spilled over, lifting the TSX to new heights multiple times during the week. Shopify’s stellar earnings report, a rebound in oil prices, and hopes for additional rate cuts by both the BoC and the Fed added fuel to the climb. However, strong US retail sales data tempered expectations for further Fed rate cuts, dragging down both the US and Canadian markets. By week’s end, even the TSX had succumbed to the downward pressure from its southern neighbours.
Overall, it was a tough week for investors as many took profits following the previous week’s surge to new heights. The TSX managed to stay in positive territory a bit longer but eventually followed suit. With a little luck – and perhaps a few rate cuts from the BoC or the Fed – markets could regain their footing. Here is hoping for a Santa Claus rally to deliver some year-end cheer. And yes, I am adding a few rate cuts to my holiday wish list. 😊
| Portfolio | Weekly Streak |
| Portfolio 1: | 1 – week losing streak |
| Portfolio 2: | 2 – week winning streak |
| Portfolio 3: | 2 – week winning streak |
It wasn’t the best week for the markets overall, so it was a pleasant surprise to see all three portfolios outperform the indexes. Here’s how things unfolded:
Portfolio 1 was the only one to end the week in the red, facing an uphill battle with just 34% of its holdings posting gains. Despite the challenges, there were some standout performers: Amazon (NASD: AMZN) and Liberty Media’s Formula One (NASD: FWONK) reached all-time highs, Shopify surged 22%, and Magnite (NASD: MGNI) climbed 13%.
Unfortunately, losses across too many holdings overshadowed these wins. Semiconductor stocks in particular were a drag, with Navitas Semiconductor (NASD: NVTS) plummeting 16% and indie Semiconductor (NASD: INDI) falling 15%. Even the portfolio’s heavyweight, Nvidia (NASD: NVDA), dipped slightly, though it managed to stay just below its starting point for the week, softening the overall blow.
Portfolio 2 also delivered gains, with 44% of its holdings posting positive results. The clear standout was The Walt Disney Company (NYSE: DIS), which surged 16% following a solid earnings report. It’s great to see Disney gaining momentum and being rewarded with a healthy boost to its share price.
Portfolio 3 had the most surprising performance of the group. Despite only two stocks logging weekly gains, it recorded the biggest overall increase in value. Shopify led the way with its 22% jump, backed by Magnite’s 13% rise. These two alone powered the portfolio higher, showcasing the influence of its largest holding – Shopify. Vertiv Holdings (NYSE: VRT) also made headlines, setting a record high early in the week before retreating to post a weekly loss.
Overall, the portfolios turned in a surprising but rewarding performance, especially given the broader market weakness. Gains like these are always welcome – especially when they come from unexpected places. 😊
Companies on the Radar
Once again, no new companies made it onto my radar this past week, but one has officially dropped off. With the cash freed up from trimming my Bank of Nova Scotia (TSE: BNS) position in Portfolio 2, I decided to invest in Zoetis Inc. (NYSE: ZTS), making me a proud shareholder of this animal wellness company.
As for the remaining cash, I am still weighing whether to explore new opportunities or double down on some of the winners already in one of my portfolios. Now that Zoetis has joined the mix, I am leaning towards boosting my stake in a few existing companies, even if adding a few shares still keeps me as a very small (but happy!) owner in each. 😊
For now, my radar list remains focused on the two companies below:
- On Holding AG (NYSE: ONON), a medium cap Swiss company, founder-run, sports products company.
- Topaz Energy Corp. (TSE: TPZ), a mid-cap Canadian energy investment firm that focuses on strategic investments in premium energy assets operated by top-tier Canadian companies, and currently pays a 4.69% dividend.
As always, these are not buy recommendations – be sure to do your own research and make decisions that align with your personal financial goals!
The Radar Check was last updated November 15, 2024.
Portfolio Update
Portfolio 1
Portfolio 1 for the week ended November 15, 2024: DOWN 
- Amazon’s Amazon Web Services (AWS) unit announced they will provide free computing power to researchers who are prepared to use AWS’s custom artificial intelligence (AI) Trainium chips. AWS is hoping this will draw users to their first-generation AI chip and away from other AI chip competitors and services, such as Alphabet’s (NASD: GOOGL) Google cloud division which uses Google’s own AI chips.
In other Amazon news, the company has introduced a budget-friendly service called Amazon Haul through its e-commerce platform. The new service offers a selection of products priced under $20. Currently, Amazon Haul is available to a limited number of customers but will soon be accessible through the Amazon app. - Rivian Automotive (NASD: RIVN) announced that Volkswagen (OTCM: VWAGY) plans to increase its investment in Rivian to US$5.8 billion. The two companies plan to build electric vehicle (EV) architecture and software.
- Liberty Media’s Formula One announced current Chief Executive Officer (CEO) Greg Maffei will be stepping down from his role as CEO and becoming s senior advisor. Board Chair John Malone will become interim CEO until a new CEO is appointed.
Separately, Liberty Media has decided to concentrate on its Formula One property by spinning off many of its non motorsport assets. - General Motors (NYSE: GM) are recalling 77,824 vehicles due to faulty software in the transmission control module of certain 2022 – 2023 models. The software glitch may cause the vehicle to shift in an unintended direction.
In other GM news, in attempts to streamline the company, GM will lay off approximately 1,000 employees worldwide, though most layoffs will occur in the US. Many of those cuts will be in the EV side of the company as they look to reduce their losses in the EV market.
Activity
No significant activity to report this week.
Dividends
Dividends Received this week for the following companies:
Canadian $
No C$ dividends this past week.
US $
Apple Inc (NASD: AAPL)
BSR Real Estate Investment Trust (TSE: HOM.U)
Costco Wholesale Corp (NASD: COST)
Quarterly Reports
Grab Holdings Limited
Third quarter 2024 financial results on November 11, 2024
Skyworks Solutions, Inc.
Fourth quarter 2024 financial results on November 12, 2024
Shopify Inc.
Third quarter 2024 financial results on November 12, 2024
Sea Limited
Third quarter 2024 financial results on November 12, 2024
The Home Depot, Inc.
Third quarter 2024 financial results on November 12, 2024
Boston Omaha Corporation
Third quarter 2024 financial results on November 12, 2024
Portfolio 2
Portfolio 2 for the week ended November 15, 2024: UP 
- The Walt Disney Company is being sued by technology company Adeia (NASD: ADEA) for infringing on six of its streaming technology patents. Adeia claims Disney’s Hulu, ESPN+ and Disney+ used their technology to improve their streaming services.
Activity
After trimming my position in Bank of Nova Scotia last week to rebalance the portfolio, I found myself with a healthy amount of cash sitting idly in the account—earning a grand total of 0%. So, rather than let it lose buying power due to inflation, I decided to put it to work and went on a little shopping spree. 😊
Bought: Zoetis Inc. Zoetis is not just a leader in animal healthcare—it is the largest animal health company in the world. They develop a wide range of vaccines, medicines, and diagnostics for livestock and pets. Originally part of Pfizer, Zoetis spun off in 2013 and has consistently grown since. As a large-cap company with a market cap over $79 billion, it offers relative stability. Thanks to highly regarded leadership, the company consistently scores high in employee satisfaction ratings indicating it is a good place to work.
What sets Zoetis apart is its competitive edge. It has a robust moat, backed by a trusted brand, a broad product portfolio, and strong pricing power. Many of its vaccines and treatments face little to no direct competition, allowing the company to command premium prices. Its patented innovations and regulatory expertise make it tough for new entrants to compete. Plus, its global distribution network boosts market reach, reinforcing its dominant position.
Growth prospects are also compelling. Zoetis benefits from optionality through emerging market expansion, new pet health products, and continued R&D investments that keep it ahead in innovation. With diverse revenue streams from both livestock and pets, the company is well-insulated from sector-specific risks.
Financially, Zoetis boasts steady growth in revenues, earnings, and cash flow, driven by strong demand for animal health products. Earnings per share have consistently risen, supported by revenue growth and share buybacks. The company also provides a modest 1% dividend.
That said, there are risks. Its premium valuation could limit upside if growth slows, and low insider ownership might raise concerns about shareholder alignment. Zoetis is also exposed to regulatory risks and fluctuations in the livestock market, which could be impacted by disease outbreaks or economic shifts. Global operations bring currency risks, and slower innovation in some areas may affect long-term growth. Pet owners may also cut spending during downturns.
Overall, Zoetis stands out as a financially solid company with impressive revenue growth and strong margins. While insider ownership is on the lower side, its track record of consistent performance and its potential in the rapidly growing animal health sector make it a great pick for diversifying this balance-oriented, steady growth portfolio. Not only does it offer steady income through dividends, but it also has the upside potential for share price growth—making it a win-win for us long-term investors. 😊
Bought: Dollarama (TSE: DOL) I made an initial investment in Dollarama a year ago, and since then, the stock has increased in value by 48%. Not a bad return for just one year, especially considering Dollarama is considered a defensive stock in the Consumer Staples sector.
Despite being considered a defensive investment, the company has a strong track record of growth, even in tough times, which makes it a resilient choice—particularly when consumers are looking for value. Dollarama’s business model shines in economic uncertainty, and as inflation makes people more price-conscious, demand for affordable goods remains high. This steady demand gives Dollarama an edge over higher-priced retailers that may struggle during challenging periods. As a result, the company benefits from more stable earnings and less price volatility, making it a safer bet in uncertain times.
With ongoing expansion plans and its strong position in the Canadian market, Dollarama seems well-positioned for continued growth. For me, this makes it a good fit in Portfolio 2 – especially in unpredictable markets. I believe the steady demand for its affordable products and the company’s ability to weather economic uncertainty will continue to support its growth, which could help increase both the value of my portfolio and my wealth. 😊
Bought: Microsoft (NASD: MSFT) This company has been a part of my investing journey since the late ’90s. Unfortunately, I sold my shares during the early 2000s, when the stock seemed stuck in a flat stretch for what felt like forever. Fortunately, I reinvested in Microsoft when I got back into investing in the late teens, and it has since become a key holding in Portfolio 3. I eventually added it to Portfolio 2 as well. Both investments have performed well, and with additional cash on hand, I have decided to further increase my position in Portfolio 2.
My confidence in Microsoft remains high, thanks to its consistent financial strength, robust revenue growth, and reliable earnings. Under strong leadership, the company continues to innovate and expand, particularly in the booming AI and cloud computing markets through its Azure platform. With a stable, growing dividend and promising long-term growth prospects, adding to my stake in this market-leading technology heavyweight brings even more growth potential to the portfolio. Microsoft’s unique balance of near-term performance and future opportunities solidifies its place as a standout within the portfolio.
Dividends
Dividends Received this week for the following companies:
Canadian $
Whitecap Resources Inc (TSE: WCP)
TC Energy Corp (TSE: TRP)
SmartCentres Real Estate Investment Trust (TSE: SRU.UN)
US $
No US$ dividends this past week.
Quarterly Reports
SmartCentres Real Estate Investment Trust
Third quarter 2024 financial results on November 13, 2024
The Walt Disney Company
Fourth quarter 2024 financial results on November 14, 2024
Portfolio 3
Portfolio 3 for the week ended November 15, 2024: UP
Activity
No significant activity to report this week.
Dividends
Dividends Received this week for the following companies:
Companies followed by DRIP (Dividend Re-Investment Plan) indicate additional shares were purchased with the dividend. Any cash leftover was added to the cash balance.
Canadian $
SmartCentres Real Estate Investment Trust (TSE: SRU.UN) DRIP
US $
No US$ dividends this past week.
Quarterly Reports
Shopify Inc.
See report under Portfolio 1.
SmartCentres Real Estate Investment Trust
See report under Portfolio 2.
Brookfield Corporation
Third quarter 2024 financial results on November 14, 2024