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Category Archives: The Markets

Terry Broaders

Weekly Update February 17 2017

“Like Many Intellectuals, He Was Incapable of Saying a Simple Thing In a Simple Way” – Marcel Proust

U.S. Markets Continue Record Levels, TSX Slips On Friday

Canada’s main stock index closed lower Friday, its first decline in nine days as it pulled back from Thursday’s record high, pressured by losses for resource shares as oil and copper prices fell. Losses for the Toronto Stock Exchange’s S&P/TSX composite index came as concerns over the French election and weak data in Britain weighed on global stocks, while investors looked for clarity on U.S. President Donald Trump’s policies on tax and trade. The S&P/TSX composite index closed down 25.54 points, or 0.16 per cent, at 15,838.63. The Canadian dollar was off 0.16 to 76.30 cents (U.S.).
Trading was mixed as investors digested recent record highs fuelled by the “Trump Rally” that has seen the S&P 500 rise about almost 10 per cent since the November presidential election. The Dow Jones Industrial Average closed up 4.28 points or 0.02 per cent at 20,624.05 points, while the S&P 500 added 3.94 points, or 0.17 per cent to 2,351.16. The Nasdaq Composite added 23.68 points, or 0.41 per cent, to 5,838.58. For the week, the Dow was up 1.7 per cent, the S&P gained 1.5 per cent, and the Nasdaq added 1.8 per cent.
The Canadian dollar fell 0.11 of a U.S. cent at US76.34¢. Canadian financial markets are closed on Monday, Feb. 20 for various provincial holidays. American markets are closed for Presidents’ Day.

 

Older Canadians Unprepared for Lengthy Retirements

Only 33% of Canadians aged 55 years old or older are willing to adjust their retirement lifestyle plans to accommodate what will likely be a longer retirement as individuals continue to live longer, according to a new report from Toronto-based Royal Bank of Canada (RBC). Specifically, RBC’s Financial Independence Retirement Poll indicates that some Canadians could be spending up to three decades in retirement. But while 30 years in retirement could be a “gift of time” to Canadians to do what they want, when they want to, they also need to consider the importance of planning for those additional years.
Although most older Canadians are not considering adjusting their lifestyle for a longer retirement, 46% continue to wonder whether they will have enough money for retirement and a separate 46% say they are financially “somewhat short/nowhere close” to where they anticipated their retirement savings would be at this point in their lives. RBC’s research explores some of the more popular ways Canadians plan to spend their time in retirement. More than six in 10 (62%) say they want to take more time for themselves and 45% plan on spending more time with their spouse or partner. The third most popular activity is “getting more rest” for 43% of older Canadians while “travelling” is right behind with 42%.
Ipsos conducted the online survey of 2,033 adult Canadians from Nov. 25–30, 2016 for RBC.

 

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The New BC Home Owner Mortgage & Equity Plan Explained
Sources: Bloomberg; Investment Executive; advisor.ca; RBC

Terry Broaders

Weekly Update January 27 2017

“Whoever Is Winning At The Moment Will Always Seem Invincible” -George Orwell

Lower Oil Price Hurts TSX

The main TSX index closed lower Friday as energy and financials led losses for half of the main sectors while IT and materials were the best performers. Oil prices slipped almost 1.5 per cent in the session but closed out the week higher as concern grew over rising US production which threatens to dampen the impact of the output caps agreed by OPEC and others.

The S&P/TSX composite index shed 39.71 points to 15,575.81, with the energy sector registering the biggest losses for the index.The March crude contract slipped 61 cents to US$53.17 a barrel.

In New York, the Dow Jones industrial average lost 7.13 points to 20,093.78, the S&P 500 dropped a meagre 1.99 points to 2,294.69, and the Nasdaq composite rose 5.60 points to 5,660.78.
The Canadian dollar fell 0.23 of a U.S. cent to 76.12 cents US.

European indexes closed generally lower although London’s FTSE gained on optimism from the British prime minister’s meeting with President Trump. Asian indexes closed mostly higher although trade was thin with some markets, including China, closed for public holidays.

 

CRA Business Inquiries Phone Line Gets a “C-“

Third time isn’t a charm for the CRA’s business inquiries phone line. As part of its red tape awareness week, the Canadian Federation of Independent Business (CFIB) has conducted its third secret shopper evaluation of CRA’s call centre, giving it a grade of C-minus. Here’s the breakdown of the grade:

Accountability (A+). CFIB saw a laudable increase in agents providing their name and agent identification number.

Accuracy of information (D-). Only 69% of inquiries resulted in complete and accurate answers. This is a decrease from the 2012 survey, where 76% all responses were complete. A third of callers are still receiving incorrect or insufficient information.

Connecting to an agent (F). The lacklustre evaluation was mostly due to the number of calls that didn’t reach a CRA agent — nearly 30%. On many occasions, the callers simply couldn’t get past the busy signals. The number of calls that were unsuccessful at reaching an agent is up 50% since 2012.

Wait time (B+). Once in the queue, callers waited only two minutes on average, which is the goal set out by the CRA service standard.

Agent professionalism (C-). While the majority of agents tried their best to answer questions, some put little effort into answering clearly and correctly. Some agents simply read the answer off the website, while others directed the caller to the webpage without providing a verbal answer.

“The CRA helpline needs to find ways to offer better service to business owners,” says CFIB vice-president of national affairs, Monique Moreau, in a release. “We do applaud the government’s investments in the call centre from budget 2016 but encourage them to continue making good customer service a priority.”

 

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

Anthony Sabti

2016 Market Review & Key Themes for 2017

2016 was the year of surprises.  There were a number of unexpected political outcomes throughout the year, namely the “Brexit” vote, Donald Trump winning the U.S. presidential election and OPEC members reaching a deal to reduce oil production.

But perhaps the biggest surprise was stock markets themselves.  After the worst 10-day start in history and a January that saw 93% of investors lose money, both Canadian and U.S. markets finished the year with healthy double digit returns.  The Canadian index, represented by the TSX finished up 17.62%. The Dow Jones Industrial Index (DOW) in the U.S. set new highs and almost reached the 20,000 point mark.  It finished the year up 13.42%.  The Global Index, represented by the MSCI world, finished the year up 5.41%

What happened in 2016 serves as a reminder to investors to ignore the “noise”, take a long-term approach, and remember the importance of investing in a high quality and diversified portfolio.

Key Themes for 2017

We expect two key themes to emerge in 2017:  Improved U.S. Growth and Bond/Equity Divergence.

Economic indicators in the U.S. strengthened in the second half of 2016, confirmed by a Gross Domestic Product (GDP) number of 3.5% and a projected 2.0% pace in the 4th quarter, which comfortably exceeds the ceiling for U.S. economic growth.  The Republican administration’s planned policies are also expected to accelerate economic growth in the U.S.  Overall there is renewed faith in the longevity of the U.S. recovery.

The second key theme for 2017 is likely to be a continued divergence between equity and bond returns. For thirty years equity and bond returns have been positively correlated in that falling interest rates have benefitted equities and bonds. That has changed since the U.S. election on November 8th. Since the election, U.S. equities have rallied sharply in anticipation of stronger economic growth and its causal linkage to stronger corporate earnings while U.S. bond returns have been very soft. Bond returns have been weak because investors fear that fiscal stimulus will cause inflation to move upward.

Equity Outlook

As mentioned above, the Republican administration’s planned fiscal stimulus is expected to accelerate economic growth in the U.S.  Stronger economic growth and higher inflation should be beneficial for revenue growth, and proposed corporate tax cuts would provide a meaningful boost to corporate earnings. Because of all these possible measures, we continue to be biased towards U.S. equities.

Several Canadian companies should benefit from the strengthening of the U.S. economy in 2017. However, with weak commodity prices and Canadian economic growth and inflation expected to remain modest, Canadian equities are likely to underperform their U.S. counterparts in 2017.

Equities in some European countries are attractively valued but because of persistently low growth, inflation, high unemployment, and growing uncertainty about the future of the euro, we recommend an underweight position in international and emerging market equities.

Fixed-Income Outlook

During the first part of 2016, bond prices increased due to weak economic growth and inflation. However, as central banks’ monetary policies appeared to have peaked and it seemed that governments would have to begin implementing their own fiscal stimulus, bond prices decreased in the second half of the year.

While domestic and global government bonds can offer stability and diversification benefits, overall returns are expected to be low. Thus, most bond managers are underweight government bonds.  They may simply decide to hold cash instead and maintain a neutral weighting in investment grade bonds based on the slightly higher yields they offer over governments.

The consensus is that the Bank of Canada will hold its key interest rate steady for some time to come and that the U.S. Federal Reserve Board will modestly increase the federal funds rate over 2017.  This will likely keep short-term rates low, but U.S. fiscal stimulus may push longer yields modestly higher.

This will help keep the Canadian dollar remain low for an extended period.  The U.S. dollar is expected to drive higher due to higher growth and inflation in the U.S.

Conclusion

Although 2016’s surprises created volatility and uncertainty in the capital markets, they also created opportunities for experienced investors, and will continue to do so in the coming year.

We continue to recommend a diversified portfolio that is tailored to your individual investment objectives to take advantage of opportunities as they arise, while protecting your investments from further volatility.

On behalf of the entire You First team, we would like to wish you and your family all the best for the year ahead, and to remind you that my team and I are just an e-mail or phone call away should you wish to discuss your investment portfolio in greater detail.

 

Terry Broaders

Weekly Update January 20 2017

“I Am A Slow Walker, But I Never Walk Backwards” -Abraham Lincoln

Markets Higher As Trump Sworn In

North American stock markets closed on a high note Friday, though investors who have been seeking clarity for weeks from Donald Trump got little of it during his inaugural address as president. The S&P/TSX composite index added 138.07 points to 15,547.88 in a fairly broad-based rally. The materials sector of the TSX led the charge, up 1.64%, while global gold stocks climbed 1.25% and the financials sector gained 0.98%. Energy stocks were up 0.82%. In New York, the Dow Jones industrial average gained 94.85 points to 19,827.25, while the S&P 500 was up 7.62 points at 2,271.31 and the Nasdaq composite added 15.25 points at 5,555.33.
Stock markets have rallied in the wake of Trump’s election win on expectations that he would increase infrastructure spending, cut corporate taxes and deregulate industry — measures expected to stimulate the U.S. economy. But the upwards trajectory has stalled recently as investors seek greater assurance to determine whether Trump’s actions will justify the gains. Trump’s inauguration speech echoed the protectionist, pro-America themes that he hit on during his campaign but shed no light on issues that could have repercussions for the markets, such as trade and taxation.

In economic news, Statistics Canada reported that the annual pace of inflation climbed higher last month, but falling food prices offset gas price increases, making the increase smaller than expected. The consumer price index was up 1.5% in December compared to where it was a year ago — higher than November’s increase of 1.2%. Economists had been expecting a 1.7% year-over-year increase in December.

 

Support of Adult Children Is Impacting Boomers’ Finances

Baby boomers who are facing the prospect of their kids returning to live at home must plan for the financial impact on their retirement savings, according to the results of a new survey from Toronto-Dominion Bank. The survey of both millennial (aged 18 to 34) and baby boomer (aged 52 to 70) clients finds that the phenomenon of millennials returning to live at home with their parents is impairing the ability of the older generation to save for retirement. The survey found about 25% of boomers report that they are providing financial support to either their children or grandchildren, 62% of boomers say this is preventing them from saving enough for their own retirement, and 58% report feeling financially stressed as a result.
Millennial offspring are not unaware of the stress this arrangement puts on their boomer elders. Nearly half of millennials (44%) who are supported by their boomer parents or grandparents know that their financial situation will lead to reduced retirement savings, and 43% of millennials admit that they’d sooner cut costs than ask for financial help when they have money problems. The online survey of 523 millennials (aged 18 to 34) and 365 non-retired Boomers (aged 52 to 70) was completed online between Oct. 21 and Nov. 3, 2016. The margins of error for these samples is +/-4.3%, 19 times out of 20 for the millennials and +/- 5.1% 19 times out of 20 for boomers.

 

Sources: Bloomberg; Investment Executive; advisor.ca; TD Bank

Terry Broaders

Weekly Update November 22 2016

“All The War Propaganda, All The Screaming And Lies And Hatred Comes Invariably From People Who Are Not Fighting” -George Orwell

TSX Edges Higher While New York Stock Markets Fall

The Toronto Stock Exchange made a slight advance Friday, while New York stock markets shed some of their worth following a tumultuous period after the U.S. presidential election. A lot of the post-Trump impact has now been priced in markets. The markets are now trying to digest what the long-term impact will be and whether this is the beginning of a new major trend based on Trump’s proposed policies.  Stock markets made modest movements in either direction on Friday.  In Toronto, the S&P/TSX composite index gained 37.94 points at 14,864.03. Meanwhile south of the border, markets registered modest declines. The Dow Jones industrial average fell 35.89 points to 18,867.93, the Nasdaq composite slid 12.46 points to 5,321.51, and the broader S&P 500 shed 5.22 points at 2,181.90.
The price of oil made meagre gains. The December contract rose 27 cents to US$45.69 a barrel. The January contract for crude oil, which traded at a higher volume, gained 38 cents to US$46.36 per barrel.  The price of gold, on the other hand, has plummeted to its lowest level since mid-February. The December gold contract fell $8.20 to $1,208.70 per ounce. It last closed below that on Feb. 16 at US$1,208.20.  Rising bond yields and increased expectations that the U.S. Federal Reserve will raise rates, potentially at a faster pace than previously anticipated, is putting pressure on gold prices. On Thursday, Fed chairwoman Janet Yellen hinted at a December interest rate hike when the central bank meets for two days starting Dec. 13. The Canadian dollar fell 0.04 of a U.S. cent at 74.00 cents US.

 

3 Ways Trump’s Victory Could Affect Canada

A Donald Trump administration, combined with a Republican-controlled Senate and House of Representatives, could have reverberations that will be felt by the Canadian economy for years. Here’s a look at what Trump’s victory could mean for various sectors of our economy.
Impact on energy
Remember Keystone XL and the plans to build the 1,900-kilometre pipeline from Alberta to Nebraska?  Trump has said he would “absolutely approve it, 100%.”  Still, when considering Trump’s propensity for categorical statements, one should keep in mind the details. He has said he wants a greater cut of the profits, but hasn’t explained what that means. There’s also TransCanada’s outstanding request for US$15 billion in damages after Obama’s rejection.  Trump is also regarded as a friend of U.S. fossil fuels, on record as favouring oil and gas drilling on federal lands. That could stifle appetite for Canada’s oil and gas production.
What about trade?
Our largest trading partner will soon be led by someone who has committed to ripping up NAFTA if it isn’t renegotiated. Any country can withdraw from the free trade agreement with six months’ notice. And with Republican control of both the legislative and executive branches, Trump is better positioned than past presidents who’ve made similar threats.  But some say he could face resistance from legislators in states that have reaped the benefits of the deal.
Softwood lumber
One of the first trade irritants that could test U.S.-Canadian relations is softwood lumber. A 10-year-old agreement that removed U.S. duties on Canadian softwood lumber expired last month. That paved the way for the possibility of steep taxes, which could result in layoffs throughout Canada’s forestry sector. Trump can expect to face pressure from the U.S. lumber lobby to implement such duties. In an era of rising protectionism, he may be emboldened to oblige.

 

WEEKLY MARKET WRAP-UP

North America
The TSX closed at 14864, up 309 points or 2.12% over the past week. YTD the TSX is up 14.44%.
The DOW closed at 18868, up 20 points or 0.11% over the past week. YTD the DOW is up 8.28%.
The S&P closed at 2182, up 17 points or 0.79% over the past week. YTD the S&P is up 6.75%.
The Nasdaq closed at 5322, up 85 points or 1.62% over the past week. YTD the Nasdaq is up 6.29%.
Gold closed at 1209, down -81.00 points or -1.23% over the past week. YTD gold is up 14.16%.
Oil closed at 45.61, up 2.20 points or 5.07% over the past week.YTD oil is up 23.10%.
The USD/CAD closed at 1.350679, down -0.0035 points or -0.26% over the past week. YTD the USD/CAD is down -2.38%.

Europe/Asia
The MSCI closed at 1707, up 6 points or 0.35% over the past week. YTD the MSCI is up 2.65%.
The Euro Stoxx 50 closed at 3021, down -9 points or -0.30% over the past week. YTD the Euro Stoxx 50 is down -7.56%.
The FTSE closed at 6776, up 46 points or 0.68% over the past week. YTD the FTSE is up 8.55%.
The CAC closed at 4504, up 15 points or 0.33% over the past week. YTD the CAC is down -2.87%.
DAX closed at 10665, down -3.00 points or -0.03% over the past week. YTD DAX is down -0.73%.
Nikkei closed at 17967, up 592.00 points or 3.41% over the past week. YTD Nikkei is down -5.61%.
The Shanghai closed at 3193, down -3.0000 points or -0.09% over the past week. YTD the Shanghai is down -9.78%..

 

Sources: Bloomberg; Investment Executive;  advisor.ca

Odette Morin

What to expect with Trump as the new US President?

New York, NY USA - July 16, 2016: Donald Trump speaks during introduction Governor Mike Pence as running for vice president at Hilton hotel Midtown Manhattan

After a long and bitter campaign, the Donald Trump Republican party has firmly taken control of Capitol Hill, winning the Presidency, the Senate and the House of Representatives. While portfolio managers were positioned for a Hillary Clinton victory, the markets have been positive to a clear, uncontested election result and a pro-business president.

The market rally that followed the election, was almost as shocking as Trump’s win.  The Dow futures were 700points down as the Trump majority was forming up.  However, U.S. stocks rose sharply at market opening the next day on speculation that Donald Trump and a Republican-controlled Congress will pursue business-friendly policies.  The markets will be watching closely to see how Trump starts putting policy specifics to his broad plans.

President-elect Trump’s policies will be very different from President Obama’s. The primary beneficiaries of the Trump victory will be defence, infrastructure, engineering/construction and more domestically focussed companies. We also expect Trump’s victory to be slightly positive for oil prices.

The markets will be closely watching now for signs that Trump adopts a statesmanlike tone and selects a credible cabinet. . Remember that while Trump is president, he does not have a free reign.  He is constitutionally constrained by congress consisting of the senate and the house of representatives.

We expect higher volatility than normal as we go through the end of the year and into the first quarter. That’s where remaining disciplined with your asset allocation is really important.

Don’t hesitate to contact us should you want to discuss this event as it relates to your portfolio.  Either myself, Terry, Anthony or Frank will be happy to speak with you.

Below are the before and after November 8 election markets numbers.

Nov 8             Nov 10        Percentage Change
TSX             14,656            14,744            +0.60%
Dow Jones  18,332             18,807            +2.59%
S&P 500       2139                2167             +1.31%
Gold            $1247               1258             -1.26%
CDN$          $0.7516USD    $74.22USD     -1.25%