B8 G THE GLOBE AND MAIL | WEDNESDAY, JULY 16, 2025 GLOBE INVESTOR | REPORT ON BUSINESS M any Canadians view real estate as the country’s most reliable investment. Yet, when we strip away the lev- erage effect of mortgages, the numbers tell a different story. Since January, 2001, gold – not Canadian real estate or stocks – has been the best-performing asset with a cumulative annual growth rate (CAGR) of 10.3 per cent. By comparison, the Canadian S&P/TSX Composite Index re- turned around 7.3 per cent an- nually while the U.S. S&P 500 index returned about 8 per cent. Canadian real estate delivered between 6 per cent and 8.6 per cent, depending on rental in- come. In the chart, we analyzed the investment returns of three major asset classes – gold, the TSX NTR Index and the average Canadian home, both with and without rental income. We also analyzed the assets against growth of the total money supply, or M2, which represents all the money circulating in the econo- my, including cash, savings and other easily accessible funds. For housing, we modelled three scenarios: one with no rent- al income – so owner-occupied homes – one with a modest rent- al profit of 2 per cent (defined as an annual net income equal to 2 per cent of the property’s value), and another with a rental profit of 4 per cent. Higher rental profits boost investor returns, since rent- al income is added to property appreciation. For the S&P/TSX Index, we assumed full dividend reinvest- ment after all of the applicable withholding tax. For the S&P 500, we also assumed full dividend reinvestment but without apply- ing any withholding tax, as no index has tracked it with with- holding tax since 2000. While CPI averaged 2.2 per cent annually, the value of assets such as homes, gold and equities rose significant- ly faster. Why? THE DISCONNECT BETWEEN CPI AND ASSET PRICES The CPI measures the cost of con- sumer goods and services – not asset price inflation. For instance, the housing component of CPI tracks changes in rent and mort- gage interest payments rather than home prices themselves. So when home prices rise, the im- pact on CPI is limited. In contrast, asset prices appear to be more closely tied to the growth of the money supply, which has expanded sharply thanks to the Bank of Canada money printing and a prolonged period of low interest rates. As more money enters the economy, it tends to flow into assets, driv- ing prices higher. Gold, in particular, acts as a store of value. While central banks have increased the money supply rapidly, the global supply of gold increases by only 1 per cent to 2 per cent annually through gold mining. This scarci- ty has helped gold maintain its value over time and outperform other asset classes. THE LONG-TERM OUTLOOK Gold has been the standout investment of the 21st century, outperforming stock markets in both Canada and the U.S., and surpassing Canadian real estate. Although Bitcoin has delivered even stronger returns, it was ex- cluded from this analysis owing to its relatively recent emergence as an asset class. That said, it’s important to consider the unique role of lever- age in real estate. Because homes can be bought using mortgages, investors often only need to con- tribute a fraction of the proper- ty’s value up front. This can sub- stantially boost returns on equi- ty–making mortgaged real estate potentially more lucrative than the unleveraged figures that are presented here suggest. Ultimately, if the money sup- ply keeps growing at a compound rate of around 7 per cent annual- ly, asset prices are likely to follow a similar long-term trend – while incomes, more closely tied to CPI, may lag behind. Past perform- ance is no guarantee of future results. The best-performing investment of the century 21st century asset inflation in Canada Since Jan. 1, 2001 2005 2010 2015 2020 2025 0 200 400 600 800 1,000 S&P/TSX Composite NTR Index Gold Index Home Price Index (no rental income) Home Price Index (including 2 per cent net rental yield) Home Price Index (including 4 per cent net rental yield) THE GLOBE AND MAIL, SOURCE: AUTHOR’S CALCULATIONS BASED ON DATA FROM STATISTICS CANADA, FEDERAL RESERVE BANK OF DALLAS, YAHOO FINANCE, WORLD GOLD COUNCIL, BANK OF CANADA AND INVESTING.COM Since January, 2001, gold – not Canadian real estate or stocks – has been the most reliable asset HANIF BAYAT OPINION PhD and the CEO and founder of WOWA.ca, a Canadian personal finance platform E veryone who has played Monopoly knows that you don’t win by cornering the utilities market. There are only two on the board, Water Works and Electric Company, and the reward for owning either or both is very modest. It’s the same way in the real world. Utility stocks provide de- cent cash flow, but nothing eye- popping. As for capital-gains potential, it’s very limited. So, why do I keep suggesting that utility stocks should be among the core holdings of a well- managed income portfolio? Sev- eral reasons. Dependable revenue. Most of the revenue earned by utilities is reg- ulated. That means local, provin- cial, or national boards set the rate the companies can charge to deliver gas, electricity, or water. The permitted rate is based on several factors, but it will always be at a level that allows the com- pany to earn a reasonable profit. No regulatory commission wants to bankrupt a provider of essen- tial services. Predictable profits. Dependable revenue normally translates into predictable profits. Utilities have two major cost centres – interest charges for servicing their heavy debt, incurred by investing in infrastructure, and continuing operating and maintenance costs. These expenses are usually fore- seeable and included in budget forecasts. The major wild card is the cost of buying the commodi- ties they distribute (e.g., natural gas, electricity) if they don’t pro- duce it themselves. Rising dividends. Regulators normally allow utilities to make small but regular increases to the dividends paid to investors. The two Canadian companies with the longest track record of in- creasing their payout at least once a year are both utilities: Fortis Inc., based in St. John’s, and Calgary- based Canadian Utilities Ltd. Both have boosted payments for 51 consecutive years and counting. With this kind of record, it’s not surprising that we have several Canadian utilities on my Income Investor newsletter recommend- ed list. All are worth considering, but my preferred choice is Fortis. Here’s a look. Prices are as of Fri- day. Fortis Inc. (FTS-T) Type: Common stock Current price: $64.61 Originally recommended: Jan. 28/16 at $38.14 Annual payout: $2.46 Yield: 3.8 per cent Risk: Lower risk Website: www.fortisinc.com Comments: Fortis supplies gas and electricity services to about 3.4 million people across Canada and in the U.S. and Caribbean. It uses a decentralized business model. Its companies include the following: ITC Holdings Inc. ITC owns and operates 26,100 kilometres of transmission lines in the mid- western U.S. They have a com- bined peak load exceeding 22,683 megawatts and are regulated by the U.S. Federal Energy Regulato- ry Commission. UNS Energy Corp. This subsidi- ary owns Tucson Electric Power and UniSource Energy Services. The company provides gas and electricity services to about 725,000 customers in Arizona. It has 3,442 MW of generating capac- ity. Central Hudson Energy Corp. This is a regulated transmission and distribution utility which serves about 405,000 customers in New York’s Mid-Hudson River Valley. It owns 2,400 km of gas pipelines and 15,300 km of power lines. Caribbean Utilities Co. Fortis owns about 60 per cent of this publicly traded company (CUP.U- T). It is the sole electricity provid- er on Grand Cayman, Cayman Is- lands. FortisTCI Ltd. This small com- pany provides electricity to the Turks and Caicos Islands. The company is comprised of two integrated regulated electric utili- ties. Fortis Belize Ltd. his company generates 100-per-cent renewable energy through the operation of three hydroelectric facilities on the Macal River in western Belize. Generating capacity is 51 MW. Other Fortis companies service areas within Canada and include Newfoundland Power, Maritime Electric, FortisBC, FortisAlberta, FortisOntario and Wataynika- neyap Power, which is majority- owned by 24 Ontario First Nations in partnership with Fortis (39 per cent). Fortis recently released results for the first quarter of 2025, and they were in line with expecta- tions. Net earnings were $499- million ($1 a share), up from $459- million (93 cents a share) for the same period last year. Capital ex- penditures in the quarter were $1.4-billion. That was on track for the $5.2-billion budgeted for the full year. “We are off to a strong start in 2025,” said chief executive David Hutchens. “Our utilities are exe- cuting their capital programs while continuing to actively pur- sue incremental investment op- portunities, particularly at ITC and Tucson Electric Power.” The shares pay a quarterly divi- dend of 61.5 cents ($2.46 a year) to yield 3.8 per cent at the current price. Management targets an annual dividend increase in the range of 4 per cent to 6 per cent. The outlook is for continued modest annual dividend increas- es for as far out as we can see. There is some modest capital gains potential if the Bank of Can- ada starts to lower interest rates again. Bottom line: Apart from pre- dictability in revenue and profits, Fortis also offers geographic di- versification. It’s a good fit for all income portfolios. Why you should own utilities – and a top pick of the bunch GORDON PAPE OPINION Editor and publisher of the Internet Wealth Builder and Income Investor newsletters But some financial advisers and retail strategists say parents and students are unlikely to save much by snapping up sharpened pencils, calculators and the like early, and may even end up spending more than if they’d waited. A June report from Retail Council of Canada and Caddle, a rewards app, found that about 67 per cent of parents surveyed had either started or planned to start back-to-school shopping in late spring or early summer. Surveys took place in May on Caddle’s mobile platform and online panel across a representa- tive randomized sample of 1,211 Canadian shoppers with children attending kindergarten to Grade 12 in the coming school year. According to the report, the average spend per child was $600 to $750. Concerns about possible price hikes or limited availability could be influencing shopping behaviour, according to the retail council’s vice-president of mem- ber services and marketing, San- to Ligotti. “Consumers may also be in- clined to start earlier this year given the uncertainty around tariffs,” he said in an e-mail. “Par- ticularly following Trump’s re- marks about a potential 35-per- cent increase.” This year, shoppers have also been inundated with promotions in the second week of July. The so-called “Black Friday in sum- mer” sales included Amazon- .com Inc.’s Prime Day promotion from July 8 to 11, alongside deals from competitors that are play- ing catch-up. The shopping event brought in US$24.1-billion in online spending across American retail- ers, a 30.3-per-cent spike year- over-year, Adobe Analytics said on Saturday. The apparel category was ex- pected to boast the biggest dis- counts, at 24 per cent, but back- to-school merchandise repre- sented some of the biggest growth in sales, according to Adobe. Online sales of backpacks and lunchboxes were set to grow 225 per cent during this promotional period compared to the daily average in June, Adobe said – the largest projected increase of any product category, despite not having the biggest discounts. Canadian parents are actively seeking deals, with mass mer- chandisers such as Walmart Can- ada remaining the go-to starting point, according to the survey from retail council and Caddle. The report found that 91 per cent of shoppers feel prices have increased and more than half said school supplies are signifi- cantly more expensive than in previous years. Even so, parents are unlikely to save much, if at all, by starting early. For starters, most retailers purchased inventory months ahead of back-to-school season and long before Mr. Trump’s most recent round of tariff threats. So, any new tariffs likely won’t bump up back-to-school prices significantly from what they are now, according to Lisa Hutche- son, a retail consultant and managing partner at J.C. Wil- liams Group. “The inventory that they have now is the inventory they have for their future orders,” she said. The same goes for items such as clothing and electronics. Much of the stock for back-to-school was “front-end loaded” ahead of expected tariffs, which has helped stabilize prices, said Syl- vain Golsse, national global trade leader at EY Canada. If Mr. Trump’s tariffs do go through, consumers may see some price increases as retailers try to offset future losses. “If an iPhone was manufactured in China and imported into the U.S. first … it’s going to be more expensive for the Canadian im- porter to bring that same device into Canada,” he said, even if Canada hasn’t imposed new tar- iffs. “But I think they can’t change [prices] drastically,” said Ms. Hutcheson. Instead, retailers may offset costs in other ways, such as by embracing automa- tion to cut costs, she said. “I don’t think we’re going to just see a 35-per-cent increase in pricing.” That isn’t to say that prices won’t be pushed up eventually if Mr. Trump unleashes his latest tariff threats. But those are more likely to show up near the Christ- mas holiday season, Mr. Golsse said. Still, retailers may be capitaliz- ing on the uncertainty around tariffs by nudging people to turn “wants into needs,” said Adam Chapman, a certified financial planner based in London, Ont. At the end of the day, “you’re guessing at what you need; prob- ably buying a lot more than what’s required.” Buying earlier often means duplicating or wasting money on items that aren’t ultimately nec- essary, Mr. Chapman said. “The best kind of controlled, condensed shopping for school supplies is actually after school starts,” he said. At that point, teachers provide checklists and students know what’s required. The retail council’s survey also found that the vast majority of parents surveyed – more than 90 per cent – plan to shop in-store. But there may be back-to-school savings opportunities online, said Mr. Golsse, especially if your kids roam store aisles with you. “You’re going to end up leav- ing with a heck of a lot more,” he said. “They’re getting excited … and you already think they need it, so then that excitement com- ing off them just entices you to spend because it’s for education.” School: Report finds average supply spend per child was between $600 and $750 FROM B1 ILLUSTRATION BY CRISTINA GAIDAU/GETTY IMAGES