Blog

Category Archives: Frank’s Update

Frank Mueller

Weekly Update – May 19, 2017

“I’m in the business where I can’t ever say there’s no risk associated with someone” – James Comey

Toronto Stock Exchange (TSX) and Other Major Indices Rally to End the Week

The Toronto Stock Exchange’s S&P/TSX composite index rallied to gain 181.3 points on Friday, good for a 1.19% increase, pushed higher by energy and financials, to close out the week at 15,458.46. 9 of the 10 main sectors on the TSX rose on Friday. The energy sector rose by 3.25%. The Loonie jumped by half a cent to finish the week at 73.97 cents US, due partially to the annual inflation rate of 1.6% holding steady throughout April. Gold rose to finish at $1,253.87 per ounce.

The rally followed Wednesday’s dismal performance, as investors worried about the leaked Comey memos from his meeting with Trump in February. Indeed, Wednesday was the worst day for the TSX in 8 months.

South of the 49th parallel, the Dow Jones Industrial Average finished the week at 20,804.84 after a Friday that saw a rise of 141.82 points (0.69%). The S&P500 and NASDAQ also posted gains on Friday, although – like the TSX – all 3 indices were down for the week on the heels of the leaked James Comey memos. The U.S. Dollar lost ground against its counterparts this week, also thanks to the Comey memos. The Greenback lost 0.75% on Friday alone, and over 2% for the week.

Reverberations from Comey Firing Carry into this Week

All eyes are on the White House it seems, with new information coming to light almost hourly. This added attention on the political forum led to some steep drops mid-week, before markets rallied on Thursday and Friday. Looking forward, it doesn’t appear that this story is going anywhere. Democrats and now even some Republicans have uttered the dreaded “I-word” (Impeachment), not yet 5 months into Trump’s presidency.

One thing markets don’t like is uncertainty. With the uncertainty surrounding the White House, there is bound to be some market volatility in the near-future, as more information is dug up.

You can read a more in-depth analysis of our short- and long-term market outlook in our blog “Will Donald Trump Get Impeached?”. The link is at the bottom of this page.

Sources: Globe Advisor

Links

Will Donald Trump Get Impeached?

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

Frank Mueller

Weekly Update – May 5, 2017

“A satisfied customer is the best business strategy of all” – Michael LeBoeuf

TSX Rises, Major US Indices Also Close Out the Week with Increases

The Toronto Stock Exchange’s S&P/TSX composite index rose – on the back of rising oil – by 1.2% on Friday to close out the week at 15,582.04, but it wasn’t alone. The S&P 500 recorded a record-high close of 2,399.29, the Dow Jones Industrial Average rose 0.26% to finish at 21,006.94, and the Nasdaq Composite climbed to 6,100.76 to finish off the week.

Rising oil prices, as well as strong US jobs numbers, better-than-expected earnings calls, and unchanged interest rates, helped to buoy the US indices. The US added 211,000 nonfarm jobs in April, up from a modest March increase of 79,000.

Oil enjoyed a bump on the news that Russian and Saudi Arabia may be ready to extend supply cuts, joining OPEC. The Federal Reserve opted to stay the course without an increase at this time. According to Thomson Reuters data, investors put the odds of a June rate increase at 75%. Lastly, the earnings reports for the first quarter 2017 gave investors a confidence boost. The S&P 500 first quarter returns were their strongest since 2011, at an increase of 14.7%.

U.S. House of Representatives Passes American Health Care Act

The U.S. Congress narrowly voted in favour of repealing much of the Affordable Care Act, known also as “Obamacare”. The AHCA – coined “Trumpcare” – must still get through the Senate to be signed into law by President Trump. While many political analysts feel that the bill is likely to be voted down by the Senate, there is a chance that Trumpcare will come into effect.

The impact on U.S. markets remains to be seen, but markets were up on Friday after a mixed post-vote Thursday.

The Healthcare industry in the United States has been estimated to be about 1/6th of its economy, so such a vast overhaul would create waves throughout the entire economy. Should the bill come into law, the Healthcare industry would potentially stand to gain ground in the short term, due to an increased set of pre-existing conditions that could lead to denial of coverage.

Looking at the mid- to long-term, with the loss of coverage anticipated to be in the 24-million-person range, it is possible that Trumpcare would end up being a drag on the economy, as the uninsured may not be able to afford their healthcare bills, should they become ill.

Sources: Globe Advisor, New York Times

Links

Odette and Terry Retirement Announcement

 

Frank Mueller

BC Training & Education Savings Grant – Who Says Nothing in Life is Free?

In 2013, the Government of British Columbia introduced the BC Training & Education Savings Grant. This grant is a great way to help build your child’s RESP, as it will receive a one-time grant of $1,200.

According to the BC Training and Education Savings Grant’s info website, the following 3 conditions must be met in order to qualify for the $1,200 one-time grant:

  1. The child must be born in 2006 or later
  2. You and the child must be residents of British Columbia
  3. The child is the beneficiary of a Registered Education Savings Plan (RESP) with a participating financial institution

The earliest you can apply to receive the grant is on the child’s 6th birthday, and the latest you can apply is the day before the child’s 9th birthday.

If your child meets these 3 conditions, they are eligible to apply for and receive the one-time grant of $1,200. We have been reviewing all of our client RESP accounts, and looking for accounts with beneficiaries that meet the above criteria. If you have an RESP account with us, and would like to find out if your child qualifies for this one-time grant, please do not hesitate to contact us.

Frank Mueller

Weekly Update – April 8, 2016

TSX REBOUNDS FRIDAY ON STRONG JOBS NUMBERS, OIL SURGE

The S&P/TSX Composite closed the week at 13,396.73, down 0.3% for the week. At a 2.9% gain year-to-date, Toronto’s main index continues to trail only New Zealand’s index – the world’s best 2016 performer.

While down much of the week, a Friday surge, spurred by encouraging jobs numbers and a 6.6% jump in oil, helped the TSX to cut its losses for the week.

Strong Canadian jobs numbers for March posted a stronger-than-expected increase. A potential knock-on effect of this news could be felt on April 13th, if the Bank of Canada decides not to cut rates again. Before the jobs numbers were released, there was speculation of a rate cut happening again with hopes of further economy stimulation.

Oil enjoyed a healthy jump to finish the week, as data from the Energy Information Administration showed a decreasing U.S. production for the 10th time in 11 weeks, as well as decreased crude stockpiles. West Texas Intermediate May futures closed at $39.72USD per barrel, almost a 50% increase from the February lows, while Brent June futures closed at $41.92USD per barrel. A meeting of oil-producing countries, scheduled for April 17th in Doha, is highly anticipated, as an agreement to freeze output would buoy oil’s price further. John Kilduff, partner at New York energy-focused Hedge Fund Again Capital LLC, stated “We’re still hemmed in a range below $40. Breaking through would be very bullish for the market”.

However, many analysts aren’t believers in an extended oil rally, citing Iran’s goal of winning market share, as well as the world total supply surplus as the main reasons not to believe the hype. Without Iran being on board with a supply cut, other producers cutting supply would only lead to a loss in market share to Iran.

 

Blog Posts

To Buy Or Not To Buy, That Is The Question

How To Take The Bite Out At Tax Time

We Are Not Burger King, And That’s A Good Thing

 

SOURCES: Globe Investor

Frank Mueller

Weekly Update – April 1, 2016

TSX FINISHES MARCH UP 4.9% DESPITE LOSSES TO END THE WEEK

The S&P/TSX Composite closed the week at 13,440.44, and as March came to a close, the TSX enjoyed its strongest monthly advance since October of 2011 by posting a 4.9% gain. At a 2.7% gain year-to-date, Toronto’s main index remains behind only New Zealand’s index as the world’s best 2016 performer.

The Thursday and Friday TSX losses were led, as usual, by drops in crude oil and resources such as gold.

Oil fell below $37USD per barrel, wiping out much of it’s gains year-to-date. Comments by Saudi Arabia’s deputy crown prince, Mohammed bin Salman, were a major reason for the drop, as he stated Saudi Arabia won’t freeze output unless other major oil producers do so. Meanwhile, world-wide oil production continues at between 1-2 million barrels per day of surplus. As weather warms with the change to Spring, demand could wane. Add all these factors together, and further drops in oil’s valuation is a very real possibility.

Strong US jobs numbers for March – our southerly neighbour added 215,000 jobs – paced expectations by about 10,000, improving the overall outlook about the US economy. Adding to the positive US news was speculation about a sooner-than-expected rate hike by the Federal Reserve.

Naturally, US jobs and Fed rate hike news weighed on gold, and the metal was down by 1% before settling at $1,223.50USD at market close. For the first quarter of 2016, gold has surged to a 16% increase in price. This represents the strongest quarterly rise in decades.

TAX TIME HAS COME AGAIN

Usually, the deadline for individuals not self-employed is April 30th. However, in years – such as 2016 – where April 30th falls on a weekend or holiday, the CRA considers your return to be filed on time if they receive the return/payment on the next business day. The 2016 exception date is Monday, May 2nd.

Self-employed persons must still pay any balances outstanding on/before May 2nd, but they can file their return on or before June 15th.

If you are the executor of the estate for a deceased person who died in 2015, you might have to file a 2015 tax return for that person.

Some helpful links:

T4011 Preparing Returns for Deceased Persons 2015

What To Do Following A Death

When Do You Have To Pay Your 2016 Instalments?

 

Sources: Globe Advisor, Canada Revenue Agency Website