Making capital gains over the past two years has been hard.  The Toronto stock market (TSX) is up 4.6% and the Dow Jones Industrial average was flat, until 8 months ago.  The past 8 months have been one of the best on record, up 11.7%.  Most of the upswing has taken place after Trump won the election, up 5.4%.  It is based solely on hope that Trump will make 'America Great Again'.  He will not.  In fact, when he takes office unemployment will be 4.6% (December 2016 figure), the lowest since 2006.   His policies will result in rising unemployment and a slowing economy.

We have consistently recommended investors buy dividend paying shares.  In August (Issue 206) we pointed out how much the dividend yield was based on the purchase price of our portfolio listed on page six.  It worked out to 7.5%.  If an investor qualified for the Canadian Dividend Tax Credit (CDTC) it could have resulted in a possible annual yield of 9.3% 

We expect ten of the companies on our list to increase their dividend in 2017.  Two already have and two others recently announced they will be raising their payouts.  These potential increases could push the dividend yield closer to 8 percent, or 10% if an investor qualifies for the CDTC. 

The big question is Trump.  Will he be good for America or a disaster?  Time will tell.  Stock markets say he will be incredible.  Based on corporate earnings the Dow Jones average is predicting profits will double in 3.3 year.  This is hilarious since it has never happened because it is impossible. Stock markets are vulnerable to sizeable drops in order to fall in line with earnings.  If Trump turns out to be bad, the NYSE can fall 40%, but a 15-25% decline is more likely.

2017 will be an interesting year, no doubt.  While the stock markets are currently foreshadowing explosive growth, the reality remains that the stock markets have got ahead of themselves and are overvalued.  The best thing to do is to remain on the sidelines until Trump is sworn in.  He is very unpredictable and will most likely not be able to make America Great Again.

We expect the peak in the stock markets to be somewhere between January 10 to 31st.  Trump takes over on January 20^th at which time reality will set in.  It is also the day, give or take a one or two, when the U.S. government debt hits $20t.  It will climb higher under Trump’s control since he is already on record saying that he will add to the debt.  This is not a positive for stock markets around the world. 

Stock markets are very expensive today.  At best they will remain flat, although we expect a decline.  How far will depend on what Trump does.  Our 7.5% dividend yield will outperform the stock markets in 2017, just as they have for the past 2 years.