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Terry Broaders

Weekly Update June 23 2017

“Well Begun Is Half Done” – Aristotle

 

TSX Rallies On Resource Stocks

Canada’s main stock index rallied on the strength of resource stocks, but shares in BlackBerry plunged after its first-quarter sales failed to meet expectations. The S&P/TSX composite index advanced 99.66 points to 15,319.56, with the base metals and gold sectors leading the way. Blackberry shares dropped more than 12% after the company announced a profit of US$671 million in its latest quarter, despite revenue falling to US$235 million compared with US$400 million a year ago. In New York, the Dow Jones industrial average shed 2.53 points to 21,394.76. The S&P 500 edged up 3.80 points to 2,438.30, while the Nasdaq composite gained 28.56 points at 6,265.25. The Canadian dollar was trading 0.15 of a U.S. cent lower to an average price of US75.37¢. The August crude contract was up US27¢ at US$43.01 per barrel and the July natural gas contract advanced US4¢ at US$2.93 per mmBTU. The August gold contract gained US$7 at US$1,256.40 an ounce and the July copper contract added US3¢ at US$2.62 a pound.

 

Canada’s Most ‘Emotional’ Investors Revealed 

Do you ever wonder why some people seem more prone to making rash or emotional investment decisions? Well, a new survey reveals which groups are most likely to buy stocks based on headlines and hype. Conducted by Hennick Wealth Management, the survey of Canadian investors found that higher income earners ($75K – $150K+) were more likely to make an investment decision based on a ‘hunch’ or a tip from a friend. 11.8% of high income earners said they would buy a stock solely on a friend’s recommendation compared with just 5.3% of low-to-mid income earners ($0K-74K.)

Men (13.7%) were twice as likely to make emotional investments and buy stocks based on a hunch than women (7.5%). Men (34.2%) were also much more like to buy a stock based on the recommendation of a friend compared with women (27.8%). “Men seem particularly influenced by ‘insider advice’ from other males when investing,” said Adam Hennick of Hennick Wealth Management.  “If you do take investment advice for a friend, try to do it from your friends that have been successful in investing. This seems obvious, but sometimes our desire to act on a hot tip can overwhelm our logic. Ask yourself, is this a person who’s actually done financially well in investing, or someone who just talks a good game.”

All savvy investors know that making decisions based on emotions is a recipe for disaster, so it should come as no surprise that 22.7% of Canadians said they have regretted an investment decision they made that was based on emotion. A staggering 69.2% of men with a high income regretted making an investment decision based on a hunch or gut instinct.

Sources: Bloomberg; Investment Executive; advisor.ca

Terry Broaders

Weekly Update June 2 2017

“In Nature Nothing Exists Alone” – Rachel Carson

 

U.S. Markets Hit Records In Spite of Weaker Than Expected Jobs Datat

U.S. stock markets shrugged off weaker than expected jobs data and hit all-time highs, while lower oil prices weighed on the Toronto stock market. The Toronto Stock Exchange’s S&P/TSX composite index retreated 27.16 points to 15,442.75, while the loonie lost 0.02 of a cent to US74.05¢. South of the border, all three of the main stock indexes hit new records, with the Dow Jones industrial average gaining 62.11 points to 21,206.29. The S&P 500 index added 9.01 points to 2,439.07 while the Nasdaq composite index rose 58.97 points to 6,305.80.
Canadian exports climbed to a record in April and first-quarter labour productivity approached a three-year high, further evidence that the economy is recovering after a long slump caused by low oil prices. In commodities news, the July oil contract was down US70¢ to US$47.66 per barrel.

 

IMF Warns About Housing and Household Debt 

The International Monetary Fund is warning about the risks to the Canadian economy due to a possible correction in the housing market and urged governments to do more to protect against them. In the preliminary findings of its annual review of the Canadian economy, the IMF said Wednesday that a further tightening of macroprudential and tax-based measures to mitigate speculative and investment activity should be considered. It also called for greater co-ordination between federal and provincial regulators as well as government efforts to collect more comprehensive data on real estate transactions.
Ottawa has moved several times in recent years to tighten mortgage lending rules, including expanded stress tests on mortgages. A foreign buyer tax of 15% was implemented in the Vancouver region last summer, while Ontario recently announced plans for a similar levy for the Greater Toronto Area. Cheng Hoon Lim, the IMF’s mission chief for Canada, said there are a few policies that could help deter speculation in the housing market and alleviate concerns about rising debt burdens. “Among these measures, a cap on household debt to income or more stringent qualification criteria for household debt above a certain threshold will go directly to addressing household indebtedness,” she said. The IMF also encouraged B.C. and Ontario to replace their foreign buyer taxes. “This could include a combination of prudential and tax-based measures that discourage speculative activity without discriminating between residents and non-residents,” it said.

Sources: Bloomberg; Investment Executive; advisor.ca

Terry Broaders

Weekly Update May 26 2017

“All The Boys and Girls of Today Are The Men and Women of Tomorrow ” – Jimmy Cliff

 

North American Stocks Flat

North American stock markets were relatively flat Friday, while the price of oil rebounded after dropping nearly US$2.50 a barrel the day before. The S&P/TSX composite index inched forward 6.20 points to 15,416.93 as the gold sector led the way. The June gold contract soared US$11.70 to US$1,268.10 an ounce, while the S&P/TSX global gold index gained 0.74%. “We’re still seeing the U.S. dollar sub-performing and I think that’s giving gold some support,” said Andrew Pyle, a senior wealth adviser at Scotia Wealth Management. The U.S. dollar’s lacklustre performance comes in part from doubts about whether the U.S. Federal Reserve will raise rates at its June meeting, as well as economic conditions not showing enough acceleration, he said.

Meanwhile, the July crude oil contract rose US90¢ to US$49.80 per barrel, helping the energy sector in Toronto gain 0.39%. The increase came a day after investors showed disappointment over OPEC’s decision to extend production cuts by nine months. Some had hoped for deeper and longer cuts.

In New York, the Dow Jones industrial average shed 2.67 points to 21,080.28. The S&P 500 index gained a meagre three-quarters of a point to a record-high 2,415.82, while the Nasdaq composite index rose 4.93 points to a record-high 6,210.19. The U.S. markets will be closed Monday for the Memorial Day holiday. The Canadian dollar fell 0.01 of a U.S. cent to an average price of US74.32¢.

 

Canadian Youth Rank 2nd In Financial Literacy 

Canadian youth surpass their global peers when it comes to financial literacy. A survey from the Organization for Economic Co-operation and Development (OECD) finds that 87% of Canadian students perform at or above a baseline level of proficiency in financial literacy. That compares to about 78% of students in the other OECD countries. Overall, Canada ranked second — tied with Belgium — out of 15 countries. China scooped the number-one spot.
About 22% of Canadian students surveyed are top performers in financial literacy — proficient at the survey’s highest level. These students can analyze complex financial products, solve non-routine financial problems and show an understanding of the wider financial landscape. A sample question asked students to identify and respond appropriately to a financial scam email message.
In the other OECD countries, only 12% of students are top performers. China was the exception, with 33% of students being top performers. On average, students with a bank account have higher financial literacy than students without accounts. More than three-quarters of 15-year-old Canadian students (78%) have bank accounts. That’s significantly higher that the OECD average of 56%. Four out of five Canadian students said that if they didn’t have enough money to buy something they really wanted, they would either save up to buy it or would forgo. About 52% of Canadian students report that they save each week or month.

In 2015, close to 48,000 students from 15 countries and economies took part in the financial literacy assessment. In Canada, approximately 3,400 15-year-olds from seven provinces (Newfoundland and Labrador, Prince Edward Island, Nova Scotia, New Brunswick, Ontario, Manitoba and British Columbia) participated. worse when they were highly confident of their performance.”

 

 

 

Sources: Bloomberg; Investment Executive; advisor.ca; OECD

Frank Mueller

What Happens if Donald Trump Gets Impeached?

Will Donald Trump be Impeached?

Whether or not you like Donald Trump, one thing that many of us will agree upon is the notion that the simple fact his potential impeachment is being considered, only a few short months into his presidency, is a stunning turn of events. Still, this is where the bizarre story being written in the White House has brought us.

Last week, Trump abruptly fired F.B.I. Director James Comey. Almost immediately, the White House’s explanation of why Comey was fired began to fragment, as none of President Trump, Press Secretary Sean Spicer, or any of Trump’s handlers – such as Kellyanne Conway – could get their story straight, or even aligned with one another’s.

Fast-forwarding to this week, a leaked memo surfaced in which Mr. Comey detailed his meeting with President Trump. According to the memo, the meeting – which occurred the day after National Security Advisor Mike Flynn’s resignation – centered around the potential investigation of Mr. Flynn’s contact with the Russian ambassador to the United States, both before and following the November 8th Election. During their meeting, Comey writes that Trump said to him, “I hope you can see your way clear to letting this go, to letting Flynn go.” Trump continued, “He is a good guy. I hope you can let this go.” Comey would only go as far as to agree that Flynn was “a good guy”, but wouldn’t commit to dropping any such investigation. Later, Comey was terminated.

Unsurprisingly, the White House has denied the accuracy of the leaked memo. Many analysts and political pundits have pointed out that Trump’s firing of Comey – particularly with this leaked memo coming to light – establishes the very real possibility that Trump could be impeached for Obstruction of Justice (the same threat that forced Richard Nixon to resign his Presidency on August 8, 1974).

Today, it is being reported that the investigation has now identified a “senior White House advisor” who is “close to the president”. Many Democratic politicians, as well as some Republican politicians, are demanding to see the Comey leaked memo. This bipartisan interest in the memo should be worrying for Trump. It certainly appears that the Russia investigation is not going away anytime soon, and their could be major political fallout in the near future.

How Will Markets React if Trump is Impeached?

Markets this week have not taken Comey’s dismissal well, with some major Canadian and US Stock Indices suffering their worst day in over 8 months on Wednesday.

Political uncertainty is bound to weigh on investor confidence. Trump is a wildcard, prone to saying and doing what he wants, regardless of truth or accuracy (or legality), and the potential risks associated with such a personality as president are being felt right now. However, Trump’s potential successor would be far less risky, from a pro-business point of view.

Should Trump be impeached and removed from office, in would step Vice-President Mike Pence to assume the role of Commander-In-Chief. The initial uncertainty of an impeachment could result in a drop in the market; however, the market’s long-term response would likely be positive. There are three key reasons for this:

Firstly, Pence is obviously a Republican. He served as Governor of Indiana from 2013-2017, and shares the same pro-business views as his Republican counterparts. He is, relative to Trump, a drama-free. He knows and has a good working relationship with many politicians in both the House and the Senate. His time as Governor has given him both the experience and the knowledge of the political process.

Secondly, at least until the 2018 Midterm Elections, both the U.S. House of Representatives and the U.S. Senate are controlled by the Republicans, as they hold majorities in both. Tax reform may be put to the backburner temporarily if impeachment proceedings happen, but at some point, the Republicans should be able to start advancing their political agenda.

Thirdly, and perhaps most importantly, Pence’s relative stability would allow the markets to rebound in a less politically risky environment. It would be (pro) business as usual.

What Action Should I Take?

Our recommendation, as always, is to continue to focus on the long-term picture. A reactionary selloff if the markets drop in the near-term could result in missing out on the inevitable rebound. When that train leaves the station, you don’t want to be left standing on the platform waiting to purchase a ticket.

In fact, investors should look at a potential short-term market drop as a great opportunity to invest, as the potential to reap a nice return will present itself to those who are paying attention.

Should you have any questions or concerns, we are happy to discuss them with you. Please feel free to give us a call or send us an email.

In the short-term, enjoy your May long weekend!

Sources: CNN Politics, The Globe and Mail, The New York Times, The Washington Post

Terry Broaders

Weekly Update April 7 2017

“A Rich Man Is Nothing But A Poor Man With Money ” – W.C. Fields

 

TSX Ends Lower On Friday

Canada’s main stock index ended modestly lower on Friday as financial and natural resource shares lost ground, while concerns about escalating geopolitical tensions after a U.S. strike in Syria prompted a risk-off sentiment among investors. The Toronto Stock Exchange’s S&P/TSX composite index was down 30.05 points, or 0.19 per cent, at 15,667.13 shortly after the closing bell. Wall Street’s three major indexes edged lower on Friday to end well below session highs after a weaker-than-expected job report, a U.S. missile strike in Syria and comments by a key Federal Reserve official on the Fed’s plan to reduce its balance sheet. The Dow Jones Industrial Average fell 7.06 points, or 0.03 per cent, to 20,655.89, the S&P 500 lost 1.93 points, or 0.08 per cent, to 2,355.56 and the Nasdaq Composite dropped 1.14 points, or 0.02 per cent, to 5,877.81.
The news of the U.S.-Syria attack sent global stocks lower when it was announced, with the S&P 500 futures index falling as much as 0.5 per cent. But most of the losses ebbed after U.S. officials described the attack as a one-off that would not lead to wider escalation. U.S. employers added about 98,000 jobs in March, the fewest since last May and well below economists’ expectation of 180,000, as bad weather hit hiring at construction sites. However, wage growth ticked up slightly and the unemployment rate fell. Oil prices rose on Friday, trading near a one-month high and closing the week up 3 per cent after the United States fired missiles at a Syrian government air base, raising concern that the conflict could spread in the oil-rich region.

 

Canada Gains 19,400 Jobs 

Canada’s labour market pumped out another 19,400 net jobs last month, with the vast majority of the new work being full-time. However, Statistics Canada’s job survey Friday also showed the bulk of those new positions were created in the category of self-employment, which can include people working for a family business without pay. The report found that while 95% of the new jobs created last month were full-time, 95% of them were also self-employed positions. The agency says the country’s unemployment rate crept up in March to 6.7% from 6.6% because more people were looking for work. Compared to a year earlier, the categories of full-time and part-time work have each increased 1.5%.
The country lost 2,400 positions in the services sector last month, but added 21,800 factory jobs thanks to the biggest month-to-month surge in manufacturing work since 2002. The manufacturing sector added 24,400 positions, mostly in Ontario and to a lesser degree in Alberta, to climb back up to the same level it was 12 months earlier. Still, compared to its peak in the early 2000s, the manufacturing sector has about 630,000 fewer jobs, a drop of 27%, Statistics Canada said. Alberta easily saw the biggest overall job boost among provinces, adding 20,700 full-time jobs last month. At the other end of the spectrum, Quebec shed 17,800 full-time positions.

 

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Your Tax Return Checklists for 2016 Tax Year Preparation 

 

Sources: Bloomberg; Investment Executive; advisor.ca;

Terry Broaders

Weekly Update March 17 2017

“Replace Negative Thoughts With Positive Thoughts And You’ll Have Positive Results” – Willie Nelson

 

TSX Slips On Materials And Financials

Gold miners and large financial services companies dragged Canada’s main stock index lower Friday, as Wall Street made modest moves. On Bay Street, the S&P/TSX composite index dropped 71.92 points to 15,490.49 with the materials sector being biggest decliner on the commodity-heavy index.  In New York, markets were mixed. The Dow Jones industrial average fell 19.93 points to 20,914.62, while the S&P 500 index inched down 3.13 points to 2,378.25. The Nasdaq composite index gained 0.24 of a point at 5,901.00. The Canadian dollar sat just below the 75-cent mark, up 0.06 of a U.S. cent at US74.98¢. In commodities, the May crude oil contract added US7¢ at US$49.31 per barrel and the April natural gas contract rose US5¢ at US$2.95 per mmBTU. The April gold contract added US$3.10 at US$1,230.20 an ounce and May copper gained a cent to US$2.69 a pound.

 

Canadian Household Debt Creeps Up To Another Record 

The amount Canadians owe compared with how much they earn hit another record high last year. Statistics Canada said the amount of household credit market debt rose to 167.3% of adjusted household disposable income in the fourth quarter (Q4), up from 166.8% in the third quarter. That means there was $1.67 in credit market debt for every dollar of adjusted household disposable income.

Fuelled by mortgages and low interest rates, household debt has been climbing steadily in recent years. Policymakers have raised concerns about household debt and see it as a key risk to the economy. While interest rates have been low for years, making borrowing money cheap for Canadians, some have expressed concerns about what could happen when rates rise or if there is a shock to the economy that results in a large number of job losses. Total household credit market debt, which includes consumer credit, and mortgage and non-mortgage loans, totalled nearly $2.029 trillion in the final quarter of last year. Mortgage debt accounted for 65.5% of the total. In Q4 2016, households borrowed an additional $28.4 billion on a seasonally adjusted basis, up from $18.7 billion added in the previous quarter. However, even as borrowing rose, household sector net worth at market value rose 1.0% in Q4 2016 to $10.268 trillion, boosted by gains in the stock market. The latest reading on household debt from Statistics Canada came as consumer credit company Equifax said in its national consumer credit trends report that total consumer debt held by Canadians, including mortgages, in Q4 2016 increased 6% cent compared with a year ago to $1.718 trillion.  The Equifax report also noted that while 46% of consumers were decreasing their debt, 37% were borrowing more.

 

 

BLOG LINKS 

Your Tax Return Checklists for 2016 Tax Year Preparation 

 

Sources: Bloomberg; Investment Executive; advisor.ca;