Category Archives: The Markets

Terry Broaders

Weekly Update October 18 2016

“What Kills A Skunk Is The Publicity It Gives Itself ” – Abraham Lincoln

Toronto’s S&P/TSX Dragged Down By The Gold Sector

Toronto’s main stock index fell Friday, dragged down by weakness in the gold sector. The S&P/TSX composite index dropped 58.72 points to 14,584.99, as gold stocks shed nearly 3%. The December gold contract fell $2.10 to US$1,255.50 an ounce.  The Canadian dollar was at 76.07 cents US, up 0.34 of a U.S. cent.  U.S. stocks ended little changed on Friday, losing ground late after Federal Reserve Chair Janet Yellen’s comments on the economy.  Financial shares finished up, giving the S&P 500 its biggest boost after stronger-than-expected bank results, but gave up most of their early gains. Healthcare shares led declines. Yellen, in a speech at a conference of policymakers and academics, laid out the deepening concern at the Fed that U.S. economic potential is slipping – and may need aggressive steps to rebuild it. In New York, the Dow Jones industrial average was up 39.44 points at 18,138.38, the S&P 500 gained 0.43 points at 2,132.98, and the Nasdaq composite rose 0.83 points at 5,214.16.

For the week, the TSX was up slightly by 0.12 per cent, the Dow was down 0.6 per cent, the S&P 500 was down 1 per cent and the Nasdaq fell 1.5 per cent.


Housing Starts Pick Up In Most Regions

The pace of Canadian housing construction starts picked up nationally in September despite a decline in Ontario. The Canada Mortgage and Housing Corp. says the seasonally adjusted annual rate of starts was 220,617 in September, up from 184,201 units in August. CMHC says construction of urban multiple-unit dwellings such as townhouses, condominiums and apartments were the main reason for the increase in most regions, such as in Quebec. Quebec saw the largest gain in housing starts last month, due to the development of new rental apartments for seniors.

There were also increases in British Columbia, the Prairies and Atlantic Canada. However, Toronto was an exception: its seasonally adjusted rate dropped to 30,232 units from 40,406 units in August, mainly as a result of fewer apartment starts. Plus, several smaller cities across the province also recorded declines from one month to the next. As a result, Ontario’s overall activity fell to 67,426 housing starts in September, from 70,262 units in August.

Sources: Bloomberg; Investment Executive;, CMHC

Odette Morin

Vancouver’s Housing-Bubble Risk Unmatched on the Planet, says Swiss Bank

There is currently a certain fatigue felt in Vancouver regarding our Real Estate market. We get bombarded daily now by shocking news of unethical shadow sales deals, risky shadow lending, money laundering, property bought and sold like commodities, empty properties that could ease the scarce rental market and foreign buyers avoiding capital gains taxes on real estate gains. Many younger Vancouverites have given up hoping to ever own a home, while others have become instant millionaires recently by selling their west-end condos as a group to developers.

While this is happening, you can see cranes and construction at every corner of the city. Building towers are going up, and single family homes are being torn down to be replaced by multi-family dwellings. It’s everywhere and it is scary to see prices continue to go up, despite the common wisdom that this does not make sense. One of my clients is an architect for one of the prominent Vancouver developers. I asked him recently what his firm was doing right now in view of the current market. He responded: “We continue to build as fast as we can go”.

The recent foreign buyer taxes introduced by our city and government to attempt to cool it off seem to be working somewhat. It is still too early to tell, but this Greater Vancouver Real Estate sales price graph shows that prices have come down in August. Numbers of sales are also down.


To gain some perspective, I looked at the Toronto real estate crash in the late 80s. I found a lot of similarities to our current situation.

According to Toronto Real Estate Board data, between 1985 and 1989 the average price of a house in the Greater Toronto Area (GTA) increased by 113%. Low unemployment, large inflow of immigrants and investment speculation helped to inflate the bubble.

“In (the) late 80s everyone thought that the housing prices were going to rise indefinitely. More people jumped into the market hoping to make a fortune causing an artificial increase in demand. Suddenly housing became scarce, which further increased the price. Developers decided to profit on this illusive scarcity by building condos left and right – many of them in downtown Toronto. During the peak of the bubble the borrowing cost started increasing and the 5-year fixed mortgage reached 12.7%. Coupled with the early 90s recession, a spike in unemployment and a drop in the inflow of immigrants to the area, housing prices in the GTA collapsed. Between 1989 and 1996 the  average price of a house in GTA  declined by 40% adjusted for inflation. Downtown of Toronto was hit the worst with over 50% decline in value of a home. Unaccounted for inflation, it took 13 years for the average house price to recover in the GTA.” (*)

Looking at the graph above, similar drops happened in Vancouver in the 80s and 90s.

Real estate markets are tightly influenced by interest rates. While current interest rates are far from the double-digits of the early 90s, a rise of 2% or 3% can have a dramatic impact, as I described in my interest rate article. When interest rates start rising, our real estate market will cool off, hopefully gradually.

So what can you do to prevent financial hardship? It is impossible to know if, and when, the real estate market will crash. The market could tumble next year or it could simply cool off gradually. We just don’t know.

So, to avoid financial distress, make sure to buy real estate for the long-term. Think with a 10-year window to make sure you can ride the potential downturn. Make sure that you can afford your mortgage, even if rates go up to 5% or 6%. Finally, only buy if your job is secure or you have sufficient short-term savings to be able to meet mortgage payments for at least 6 months in the event of a job loss or sickness.

Talk to us before buying a property. We can help you confirm whether your cash flow can safely cover the mortgage, property taxes, insurance, lifestyle and savings for retirement and children’s education.


(*) Read the full story here about the Toronto Real Estate bubble in the late 80s.




Odette Morin

How Much is Too Much Equity?


When you come in for your annual review meeting, we tell you that you have 80% equity and – in some cases – you get concerned. Is that too much to be investing in the stock market, you ask? Shouldn’t you have more of safer fixed income especially as you get closer to retirement? These are valid questions.

The old investing rule of thumb was to have an equal amount of fixed income to your age.  So if you are 50, you should have an equal proportion of fixed income and equity.  This is now thought to be too conservative because of three main reasons:

  • We live longer, and we therefore have a longer time horizon and need more money to fund a longer retirement. Many now live now live beyond the 80-85 year life expectancy.
  • Fixed-income yields have plunged in past years, and are likely to stay very low in this low interest rate environment. If inflation is higher than the saving rate you get, you are actually “losing” money with a safer investment.
  • Dividends keep up with inflation, which is very important over the long-term, and also because many pension plans no longer guarantee inflation adjustments.

While stocks are more volatile in the short-term, they tend to rise over the long-term. The longer the holding period, the higher the probability that you will come out ahead. Morningstar data service, shows that the S&P500, for example, has produced positive returns in about 95% of rolling monthly 10-year holding periods from 1926 to 2015. For 15-year periods, the return was positive 99.8% of the time. That is why we always buy quality, diversify, and hold regardless of market sentiments.

So, how much equity and fixed income should you hold in your own portfolio?  It highly depends on your personal risk tolerance, as rated when you first became a client; also, it depends on whether you are retired & need income from your portfolio, or are still in the accumulation phase.

Other factors include how much other liquid savings you have on hand in case of an emergency, and if you also are part of a pension plan. Typically, we like our retired clients to have a minimum of 30% fixed income, and our younger clients only 20%. Therefore, 70% to 80% equity is normally what we recommend.

These are general guidelines. We look forward to discussing your personal asset allocation at your next annual review meeting.




Anthony Sabti

The 2016 Presidential Election: How Will Markets Be Affected?

the important moment of political choice, Democrats or Republicans

General Impact of Elections to Markets

In 2000 and 2008, the last two elections where we knew we were getting a new president, markets were in the midst of a downward correction. In November 2000, the S&P 500 was three months into the Dotcom bubble correction that wouldn’t bottom out for almost another two years. Similarly, in 2008, the S&P was one year into the financial crisis that wouldn’t hit bottom for another four months.

Investors are fortunate enough to not have experienced any such bad luck since then. American markets are trading at market highs, and aren’t defined by any one sector, or a highly leveraged consumer. Fiscal policy is still very accommodating, with interest rates at historical lows.

Although studies show that no one party (Democrat or Republican) is better for the markets, change and uncertainty usually lead to short-term market volatility.  Certainly, the potential of a Trump win could bring a Brexit-like shock to the markets. Frank and I will examine the potential impacts of a Clinton vs. Trump win:

Anthony – What Happens If Clinton Wins?

The research shows that since the 1950’s, whichever candidate leads the polls in October usually goes on to become president. Going by this trend, it seems Hillary Clinton has the better chance of winning the election. The Republicans are expected to maintain control over the Congressional House of Representatives.

This “status quo” outcome would have lesser economic and market impact. Two major policy actions of a Clinton presidency could benefit the economy: changes in corporate tax laws to promote repatriation of corporate profits held overseas to fund infrastructure spending, and immigration reform. Both of these could garner bipartisan support and have a high possibility of enactment.

Possible risks to business of a Clinton win include executive orders on drug pricing, antitrust enforcement, and restrictions on fracking for domestic oil & gas production. Inflation and interest rates will likely remain lower for longer.

Frank  What Happens If Trump Wins?

As Anthony astutely points out, there is no historical evidence in favour of either a Republican or a Democrat presidency, in terms of the effect on the markets. However, the prospect of a Donald Trump presidency does introduce one key variable into the equation: uncertainty.

Opting out, or “ripping up” of NAFTA, and other free trade agreements, could hurt emerging markets (e.g. China, Mexico, etc) who have benefitted greatly from free trade with the U.S.  Trump’s intention to put America First could lead to a shift away from globalization and would represent a risk to all asset classes, at least in the short term, similar to the market corrections post-Brexit.

Introducing stiff tariffs would have the effect of increased prices of goods, leading to lower discretionary income for Americans. This would naturally lead to decreased spending on entertainment, luxury items, etc. Increasing government spending on the military and on infrastructure could be bad for the bond market.


A Clinton presidency would certainly offer – in many ways – a “status quo” for the economy and the markets. There would be little chance of serious reform or change, as a projected Republican-controlled House would work to oppose Mrs. Clinton’s policy reform bills. As far as the markets go, they’d likely continue to be unaffected in any meaningful way in the long term. This would continue the historical trend of economic cycles ebbing and flowing independently of the Presidential election winner.

Trump, on the other hand, would be the more unpredictable president, and the uncertainty surrounding many of his platform policies could have a negative affect on the markets for an unforeseen length of time.

In the long term – regardless of the outcome – markets historically have shown resiliency and eventually adapt to the events at hand.

Terry Broaders

Weekly Update August 9 2016

“Insults Are The Arguments Employed By Those Who Are In The Wrong ” – Jean Jacques Rousseau


Two Stock Market Indices Post Record Highs

Two North American stock indices reached record highs Friday, boosted by a strong job report out of the U.S. The S&P 500 composite index advanced 18.62 to 2,182.87 from a previous record reached last month. Meanwhile, the Nasdaq composite rose 54.87 to 5,221.12 from its previous high of 5,218.86 on July 20, 2015.  The Dow Jones industrial average rose 191.48 points to 18,543.53.
In Canada the S&P/TSX composite index gained 119.99 points to 14,648.77, while Canada’s dollar plunged more than a cent at one point Friday before finishing at 75.96 cents US – a drop of .83 of a U.S. cent from Thursday’s close.  In commodities, the September crude contract fell 13 cents to US$41.80 per barrel, while gold lost $23.00 to US$1,344.40.  September natural gas was down 6.2 cents at US$2.77 per mmBTU and September copper contracts fell two cents to US$2.154 a pound.


Canada’s Economy Sheds 31,200 Jobs, U.S. Adds 255,000 Jobs

Canada’s employment market fell in July, unexpectedly losing tens of thousands of jobs — most on them full-time positions, with Ontario taking the brunt of the declines — and pushing the jobless rate higher. Data from Statistics Canada on Friday showed a net loss of 31,200 workers — enough to push the unemployment rate to 6.9 per cent, up from 6.8 per cent the previous month.  Full-time employment fell by a net 71,400 in July, while part-time positions saw a gain of 40,200, the federal agency said. The public sector shed 42,000 jobs, with only 13,600 more people working in the private sector. Ontario lost 36,000 positions in July, marking the first significant decline in the country’s largest province since September 2015, although the jobless rate was unchanged at 6.4 per cent.
Meanwhile U.S. employers added a healthy 255,000 jobs in July, a sign of confidence amid sluggish economic growth that points to a resilient economy.  July’s robust job gain may be enough to reassure investors _ and perhaps Federal Reserve policymakers _ that the economy will pick up. Its growth has been weak since last fall. The economy has been driven by consumers, who ramped up spending in the April-June quarter at the second-fastest pace since the recession.  Many analysts expect the economy to rebound in the second half of the year, with one of the most optimistic estimates coming from the Federal Reserve Bank of Atlanta: It predicts that annualized growth will reach 3.7% in the current July-September quarter.


Sources: Bloomberg; Investment Executive;,

Terry Broaders

Weekly Update July 12 2016

“Well Done Is Better Than Well Said” – Benjamin Franklin


Markets Climb Friday Following Solid U.S. Jobs Figures

Canadian stocks climbed on Friday as a resurgence in U.S. job creation in June showed resilience in the economy of Canada’s largest trading partner, offsetting a decline in the domestic payroll.  The S&P/TSX Composite Index rose 0.89 per cent, or 125.38 points, to 14,259.84 in Toronto. The gains were broad and significant with five of the index’s 10 main sectors notching gains of more than 1 per cent as investors focused on the bumper number from the much larger economy of the United States.

Canada’s job market weakened in June, capping the worst quarter for payrolls in two years. Employment fell by about 700 in June, short of economists’ forecasts for a 5,000 gain, while the jobless rate unexpectedly dropped to 6.8 percent from 6.9 per cent as Canadians left the job market. By contrast, U.S. payrolls surged by 287,000 last month, topping the highest estimate in a Bloomberg survey and accelerating the most since October. The unemployment rate rose to 4.9 per cent as more people entered the workforce. The U.S. is Canada’s largest trading partner by a wide margin, accounting for more than $540-billion in trade last year, according to data compiled by Bloomberg.
U.S. stock markets responded positively to the news, with the Dow Jones industrial average climbing 250.86 points at 18,146.74, the broader S&P 500 composite index advancing 32.00 points to 2,129.90 and the Nasdaq composite gaining 79.95 points to 4,956.76.


Most Canadians Would Change Jobs For Better Retirement Benefits 

The latest ADP Canada Sentiment Survey found that retirement benefits like pensions and group registered retirement savings plans can play a big part in an employee’s decision to change jobs. According to the survey, 77% of Canadian workers would consider leaving their current jobs if, all other things being equal, another employer offered a retirement plan.   “These numbers are an indication that employers should pay close attention to what’s important to their employees, and to what is being offered by their competitors,” said Sooky Lee, division vice president and general manager of HR business process outsourcing at ADP Canada. “Most companies track salaries to make sure they are competitive, but many forget about other compensation factors, such as retirement programs.

The survey found that employees in British Columbia were most likely to consider leaving their job for better retirement benefits, with 88% saying they would consider making a change. Those in Quebec were least likely, with only 69% saying they’d consider leaving for better retirement plans. And while most (70%) employees of small companies (2-50 employees) said they’d consider changing jobs for better retirement plans, a far greater percentage of employees at midsize companies with 51-500 employees (86%) and large companies (74%) said they’d consider making a change.  And employers shouldn’t assume that younger employees won’t be as interested in retirement benefits. In fact, the study found no significant difference in interest between millennials and older employees.   “Workers in the 18-to-34 age group are just as interested as their older colleagues in having retirement support,” Lee said.


Weekly Market Wrap Up As of July 8 2016

North America
The TSX closed at 14260, up 195 points or 1.39% over the past week. YTD the TSX is up 9.79%.
The DOW closed at 18147, up 198 points or 1.10% over the past week. YTD the DOW is up 4.14%.
The S&P closed at 2130, up 27 points or 1.28% over the past week. YTD the S&P is up 4.21%.
The Nasdaq closed at 4957, up 94 points or 1.93% over the past week. YTD the Nasdaq is down -1.00%.
Gold closed at 1367, up 38.00 points or 0.96% over the past week. YTD gold is up 29.08%.
Oil closed at 45.16, down -3.66 points or -7.50% over the past week. YTD oil is up 21.89%.
The USD/CAD closed at 1.303979, up 0.0140 points or 1.08% over the past week. YTD the USD/CAD is down -5.76%.

The MSCI closed at 1644, down -15 points or -0.90% over the past week. YTD the MSCI is down -1.14%.
The Euro Stoxx 50 closed at 2838, down -45 points or -1.56% over the past week. YTD the Euro Stoxx 50 is down -13.16%.
The FTSE closed at 6591, up 13 points or 0.20% over the past week. YTD the FTSE is up 5.59%.
The CAC closed at 4191, down -83 points or -1.94% over the past week. YTD the CAC is down -9.62%.
DAX closed at 9630, down -146.00 points or -1.49% over the past week. YTD DAX is down -10.36%.
Nikkei closed at 15107, down -576.00 points or -3.67% over the past week. YTD Nikkei is down -20.63%.
The Shanghai closed at 2988, up 55.0000 points or 1.88% over the past week. YTD the Shanghai is down -15.57%.


Sources: Bloomberg; Investment Executive;  CIBC;,