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“Never let facts get in the way of a good story” – Mark Twain

Weekly Market Wrap-Up

On Friday, US President Trump announced a 25 per cent tariff on strategically important Chinese imports, worth around $50 Billion, along with the threat of further tariffs should Beijing impose their own tariffs in kind. Chinese President Xi responded with retaliatory threats.

Thus, a potential trade war between the world’s two largest economies is one step closer. Global stock prices dropped on the news and increased tension.

Earlier in the week, the US Federal Reserve raised its key overnight rate by 0.25 per cent and signalled up to two further rate hikes for 2018.

It is highly anticipated that the Bank of Canada will follow suit with a rate hike of its own at the next policy meeting on July 11^th.

As usual, interest rate increases will generally weigh on bond pricing; as a result, investors may see a further pullback on their fixed income holdings. On the other hand, rising rates are an effective measure against inflationary pressures.

In other news, oil dropped on fears of a supply increase.

Yield Versus Return of Capital

One benefit of holding a balanced mutual fund, an income fund, or some equity funds, is that you are issued distributions. However, there is a common misunderstanding when considering how a fund distributes “yield” on a monthly or annual distribution.

A distribution is comprised of dividends, investment income such as interest, capital gains, and return of capital (ROC). Whereas dividends, interest and capital gains income are the result of the investment choices made by fund managers, ROC essentially amounts to refunded contributions.

There is nothing inherently wrong with return of capital within a distribution, especially when you opt to re-invest your distributions (the default option when investing in mutual funds). In fact, including ROC within distributions can be used to withdraw money in a tax-efficient manner in Non-Registered Accounts.

However, it is important to consider that return of capital, when included in a distribution, should not be confused with real yield.

Should you have any questions about yield versus return of capital, don’t hesitate to ask us.

Sources: Fidelity, Advisor.ca

Administrative Updates

We have some important administrative updates we’d like to share with you.

1. E-Consent Added to Wealthview Portal

The FundEX Wealthview portal now offers clients the option of electronically signing, or e-consenting, to most forms related to your portfolio. There are many advantages for the client:

1. All documents shared from advisor to client, and back to advisor, are shared in a fully secured environment. This is especially important, as e-mail hackers and electronic theft are on the rise.
2. The process can be faster and more convenient for clients, especially those who do not have access to a printer or scanner.
3. Less documents that need to be printed means less negative impact on our environment.
4. The document sharing feature of the portal can be used for any document, not just trade forms, that we need to send to you containing sensitive information.

If your portfolio is in the Nominee structure, you can already approve many types of trade requests verbally or via e-mail. However, Nominee account holders will still benefit from point 4 above when receiving non-trade related documents.

Which accounts can use e-consent?

Currently, only accounts that are solely owned can use e-consent. Jointly-owned accounts and corporate accounts are not eligible for e-consent.  E-consent for these accounts will be added in the future.

I don’t have access to Wealthview. How do I get access?

If you do not have your Wealthview portal access set up, please contact us. We will activate your Wealthview profile.

How do I access the document and provide consent?

You can follow our step-by-step guide below, or view the FundEX Tutorial in either English or French:

• Login to the Wealthview Portal
  • Upon logging in, you’ll receive a pop-up saying, “Your documents repository has been updated.” Click on “My Documents”
  • Under “Awaiting Your Signature”, you’ll see your document. You will see a statement informing you that e-consenting is, for legal purposes, the same as a physical signature
  • Click the “I have read the acknowledgement above” box
  • Then, click the document itself (the blue item in the Consult column)

• Read the document in full
  • At the bottom of the document, click the “I have read the acknowledgement above” box
  • If you notice an error, you can click the “Reject” button and comment on what the error was
  • If the document is acceptable, click the “Sign” button
  • You’ll be asked to enter your login password again to confirm the acceptance

• The document will be processed and a green “thumbs-up” box will pop up saying the e-signature has been applied successfully. You’re done!
  • Your signed document can be printed or saved on your computer, but it will be saved in your portal for seven years.

2. Verbal Consent Required For All Redemptions

As a new compliance requirement and for the safety of our clients, we will require verbal confirmation of any redemption requests, regardless of the amount.

We are taking this step to ensure we have received redemption instructions from the account owner(s).

3. You First Website Update

We are hard at work on refreshing the You First website. We hope to have the new website go live within the next month.

As always, please let us know if you have any questions, comments, or concerns on any of the above subjects. We value your input, as our top priority is to create the most client-friendly service model possible.

“Nobody likes high interest rates” – Chanda Kochhar

Bank of Canada Raises Five-Year Fixed Mortgage Rate

The Bank of Canada raised its conventional five-year fixed mortgage rate on Wednesday, from 5.14% up to 5.34%. As we all now know, the BoC’s five-year fixed rate is a crucial piece of information for prospective home buyers in Canada. Exactly how this

Less Than 20 Per Cent Down Payment

These prospective buyers must qualify for their mortgage at the BoC’s five-year fixed rate of 5.34 per cent, rather than the rate offered by their lender. For reference, the current five-year fixed rate at one of the “Big Five” Canadian banks is currently 3.74 per cent.

20 Per Cent Down Payment or More

For home buyers with 20 per cent down or more, they must qualify at the greater of the BoC five-year fixed rate, or the agreed upon rate with their bank plus 200 basis-points (two per cent).

So, using the above current five-year fixed rate, purchasers with at least 20 per cent down will have to qualify at the rate of 3.74 + 2.00 = 5.74 per cent, because the “bank rate plus 200 basis-points” exceeds the BoC’s current 5.34 per cent.

Stephen Poloz: Canadian Economy “Finally Positive”; Future Rate Hikes Possible

Stephen Poloz, Governor of the Bank of Canada recently stated that the economy was “finally positive”, adding that he was more encouraged about the economy than he was six months ago.

Poloz did caution that there are still areas of softness within the Canadian economy, as well as high levels of consumer debt. As such, the BoC will need to exercise caution with future rate hikes, to avoid future instability.

While the BoC opted not to raise its key rate steady at 1.25 per cent, analysts pegged a 70 per cent chance of a BoC rate hike in July.

Canadians should look at the potential of further rate increases as a reminder to diligently pay down debt where possible. As always, if dealing with multiple types of debts (credit card balances, student loans, mortgages, lines of credit, etc), attack those debts with the highest interest rates. This almost always means paying down credit cards first. Credit card debt is portfolio poison.

WEEKLY MARKET WRAP-UP

North America

• The TSX closed at 15983, up 254 points or 1.61% over the past week. YTD the TSX is down -1.39%.
• The DOW closed at 24831, up 568 points or 2.34% over the past week. YTD the DOW is up 0.45%.
• The S&P closed at 2728, up 65 points or 2.44% over the past week. YTD the S&P is up 2.02%.
• The NASDAQ closed at 7403, up 193 points or 2.68% over the past week. YTD the Nasdaq is up 7.24%.
• Gold closed at 1318, up -9.00 points or 0.15% over the past week. YTD gold is up 0.61%.
• Oil closed at 70.52, up 0.77 points or 1.10% over the past week. YTD oil is up 16.72%.
• The USD/CAD closed at 0.7817, up 0.0017 points or 0.22% over the past week. YTD the USD/CAD is down -1.71%.

 Europe/Asia

• The MSCI closed at 2124, up 53 points or 2.56% over the past week. YTD the MSCI is up 1.00%.
• The Euro Stoxx 50 closed at 3566, up 15 points or 0.42% over the past week. YTD the Euro Stoxx 50 is up 1.77%.
• The FTSE closed at 7725, up 158 points or 2.09% over the past week. YTD the FTSE is up 0.48%.
• The CAC closed at 5542, up 26 points or 0.47% over the past week. YTD the CAC is up 4.31%.
• DAX closed at 13001, up 181.00 points or 1.41% over the past week. YTD DAX is up 0.64%.
• Nikkei closed at 22759, up 286.00 points or 1.27% over the past week. YTD Nikkei is down -0.03%.
• The Shanghai closed at 3163, up 72.0000 points or 2.33% over the past week. YTD the Shanghai is down -4.35%.

 Fixed Income

• The 10-Yr Bond Yield closed at 2.97, up 0.0300 points or 1.02% over the past week. YTD the 10-Yr Bond Yield is up 23.75%.

Sources: Dynamic, Advisor.ca

“Markets love volatility” – Christine Lagarde

Last week, we advised that the weekly brief will only consist of market numbers until the completion of tax season on April 30th. However, we wanted to provide some perspective on the recent market pullback.

Bloomberg has written a great article on the recent volatility. Throughout the current nine-year U.S. bull market, there have been five other corrections like this one. On average, equities fell 14 per cent and took seven months to recover. It has been 60 days since the January 26th peak for the S&P 500; therefore, this current correction could last until August (if other recent selloffs are any indication).

While the message we’re trying to impart is that volatility is quite normal, we understand that it may be concerning in the short term. The above data is simply a reminder that even in an upward market there are prolonged periods of negative returns.

If you have any questions about markets or your portfolio, please feel free to contact us.

On behalf of the You First team, we wish you a Happy Easter long weekend.

“Globalization and free trade do spur economic growth, and they lead to lower prices on many goods” – Robert Reich

Please note that starting next week until the end of April, our weekly update will simply consist of the weekly and year-to-date market numbers.

Stock Markets Drop on Tariff Worries

Sabre-rattling between the United States and China intensified this week, with President Trump signing a presidential memorandum with aim to impose $60 Billion of import tariffs on Chinese goods; the Chinese retaliated with a $3 Billion tariff threat on American goods.

It should be noted that prior to officially enacting the tariffs on China, there is a 30-day consultation period on the memorandum, so there is certainly no guarantee that the tariffs will come to pass.

What does this mean for your portfolio? Well, following a relatively smooth and calm 2017, 2018 has brought us the “return of market volatility”, with more ups and downs in the market. This increased volatility provides long-term-focused investors with buying opportunities when markets do dip, such as right now.

Feel free to contact us with questions, or if you’d like to make a contribution!

Parents with Children at Daycare: Check for Fee Reductions Starting April

In its February budget, the provincial government announced various affordable childcare initiatives.

The measure that made most headlines is the affordable childcare benefit, an income-based subsidy making childcare free for families with income below $45,000. This will take effect starting September 2018.

What was not as heavily mentioned was a non-income-based fee reduction under the new Child Care Operating Funding (CCOF) program. The program is optional – childcare providers can choose to or not to participate.

For childcare providers that have opted into the CCOF program, the fee reductions will start as early as April 1^st, and are as follows:

• $350/month for group infant/toddler care
• $200/month for family infant/toddler care
• $100/month for group care for children aged 3-5
• $60/month for family care for children aged 3-5

If you have an infant or toddler or a child aged 3 to 5 in licensed group or family care, check to see if your provider is planning to participate in the fee reduction initiative.

More information can be found here.

Weekly Market Wrap-Up

North America

• The TSX closed at 15224, down -487 points or -3.10% over the past week. YTD the TSX is down -6.08%.
• The DOW closed at 23533, down -1414 points or -5.67% over the past week. YTD the DOW is down -4.80%.
• The S&P closed at 2588, down -164 points or -5.96% over the past week. YTD the S&P is down -3.22%.
• The NASDAQ closed at 6993, down -489 points or -6.54% over the past week. YTD the Nasdaq is up 1.30%.
• Gold closed at 1348, up -9.00 points or 2.51% over the past week. YTD gold is up 2.90%.
• Oil closed at 65.81, up 3.47 points or 5.57% over the past week. YTD oil is up 8.92%.
• The USD/CAD closed at 0.7755, up 0.0118 points or 1.55% over the past week. YTD the USD/CAD is down -2.49%.

Europe/Asia

• The MSCI closed at 2073, down -61 points or -2.86% over the past week. YTD the MSCI is down -1.43%.
• The Euro Stoxx 50 closed at 3304, down -133 points or -3.87% over the past week. YTD the Euro Stoxx 50 is down -5.71%.
• The FTSE closed at 6922, down -242 points or -3.38% over the past week. YTD the FTSE is down -9.96%.
• The CAC closed at 5095, down -188 points or -3.56% over the past week. YTD the CAC is down -4.10%.
• DAX closed at 11886, down -504.00 points or -4.07% over the past week. YTD DAX is down -7.99%.
• Nikkei closed at 20618, down -1059.00 points or -4.89% over the past week. YTD Nikkei is down -9.43%.
• The Shanghai closed at 3153, down -117.0000 points or -3.58% over the past week. YTD the Shanghai is down -4.66%.

Fixed Income

• The 10-Yr Bond Yield closed at 2.83, down -0.0200 points or -0.70% over the past week. YTD the 10-Yr Bond is up 17.92%.

Sources: Globe Advisor, Dynamic Funds

“Success is not final; failure is not fatal: It is the courage to continue that counts.” – Winston S. Churchill

TSX Winning Streak Snapped

The Toronto Stock Exchange’s S&P/TSX composite index rose on Friday but still posted a weekly loss. Friday saw a 21.24-point rise, good for a 0.13 per cent gain. However, the TSX was down 41.26 points on the week, closing at 16,308.18 (down 0.25 per cent week-over-week). This was the first weekly decline in a month, after three consecutive weekly gains.

Cannabis producers were down sharply, but their losses were offset by resource, gold and lumber gains.

U.S. Crude Oil rose by $2.99 USD per barrel or 4.87 per cent this week, closing at $64.43 per barrel.

Gold rose to $1,339 USD per ounce this week, as the US Dollar depreciated.

The December jobs report once again showed strong growth in Canada, with 23,700 full-time jobs and 78,600 total jobs added. Canada’s unemployment rate fell to its lowest mark in 41 years, from 5.9 per cent in November down to 5.7 per cent for December.

However, David Rosenberg, Chief Economist and Strategist at Gluskin Sheff + Associates opined “at face value the (unemployment) number looks great, but… there are question marks beneath the surface that has me thinking it is overstating the strength in the economy”.

Undaunted, the Loonie took the jobs numbers and moved upward to settle at 80.24 cents to the Greenback. Should the Bank of Canada raise their key rate next week (more on that below) we can expect the Loonie to jump again.

U.S. Markets Continue to Rise

The Dow Jones Industrial Average (DJIA) continued to skyrocket this week. Last week, the DJIA rose above 25,000 for the first time; this week, after a rise of 228.46 points (0.89 per cent) on Friday, the major index rose to 25,803.19, good for a weekly gain of 507 points, an even two per cent gain.

The S&P 500 rose 18.68 points (0.67 per cent) on Friday to close out the week at 2,786, good for a weekly gain of 1.57 per cent.

NASDAQ gained 49.29 points (0.68 per cent) on Friday to close at 7,261, a weekly gain of 124 points (1.74 per cent).

Bank of Canada Expected to Raise Rates Next Week

This coming Monday, January 15th is the dreaded “Blue Monday 2018”, where the perfect storm of poor weather, short days and long nights, the realization of how much was *actually* spent over the holidays, the fact the holidays are now firmly in the rear-view mirror, low motivation levels, and finally, the realization that most or all of our New Year’s Resolutions have failed to take hold all combine to create the saddest day on the calendar year.

For those who haven’t managed to keep spending in check over the holidays (or otherwise), this Wednesday may add to the misery. The Bank of Canada is overwhelmingly expected by analysts to raise its benchmark rate to 1.25%, up from 1.00%, this coming week. Many big banks such as RBC, TD and CIBC have already raised their mortgage rates in anticipation.

As rates climb, you can expect credit balances with variable rates, such as variable rate mortgages, home equity lines of credit (HELOCs), and secured & unsecured credit lines to increase their rates accordingly. As a result, borrowers will now pay more interest each month on these balances. Credit card rates (which are generally sky-high at 19.99 – 28.99 per cent) won’t be affected, but the rates are so high that you shouldn’t carry balances anyway.

Bottom line: pay down those credit lines where possible to avoid paying more interest each month.

WEEKLY MARKET WRAP-UP

North America
The TSX closed at 16308, down -41 points or -0.25% over the past week. YTD the TSX is up 0.61%.
The DOW closed at 25803, up 507 points or 2.00% over the past week. YTD the DOW is up 4.39%.
The S&P closed at 2786, up 43 points or 1.57% over the past week. YTD the S&P is up 4.19%.
The Nasdaq closed at 7261, up 124 points or 1.74% over the past week. YTD the Nasdaq is up 5.19%.
Gold closed at 1339, up 14.00 points or 1.13% over the past week. YTD gold is up 2.21%.
Oil closed at 64.43, up 2.99 points or 4.87% over the past week. YTD oil is up 6.64%.
The USD/CAD closed at 0.80239, down -0.0044 points or -0.55% over the past week. YTD the USD/CAD is up 0.89%.

Europe/Asia
The MSCI closed at 2172, up 15 points or 0.70% over the past week. YTD the MSCI is up 3.28%.
The Euro Stoxx 50 closed at 3613, up 5 points or 0.14% over the past week. YTD the Euro Stoxx 50 is up 3.11%.
The FTSE closed at 7779, up 55 points or 0.71% over the past week. YTD the FTSE is up 1.18%.
The CAC closed at 5517, up 46 points or 0.84% over the past week. YTD the CAC is up 3.84%.
DAX closed at 13245, down -75.00 points or -0.56% over the past week. YTD DAX is up 2.53%.
Nikkei closed at 23654, down -61.00 points or -0.26% over the past week. YTD Nikkei is up 3.91%.
The Shanghai closed at 3429, up 37.0000 points or 1.09% over the past week. YTD the Shanghai is up 3.69%.

Fixed Income
The 10-Yr Bond closed at 2.55, up 0.0700 points or 2.82% over the past week. YTD the 10-Yr Bond is up 6.25%.

Sources: Globe Advisor, BNN.ca, Yahoo! Finance