Category Archives: The Markets

Odette Morin

How is your account doing & Fall Market Outlook

world map

World Markets have been very volatile since the summer. The past week has been a welcome reprieve with 6 straight days of recovery but we are bound to see more ups and downs as global growth uncertainty continues.

Before I give you a brief fall Economic Outlook, I feel the need to remind you that your account results have been quite good compared to the markets. The North American markets have lost about 9% year to date. Most of you hold a combination of fixed income, cash and a healthy dose of International Equities, not just North American Equities. Your account will likely show a small gain or very small loss if any.

We do not anticipate any recessions or long-term downturn. Short-term volatility is a normal and healthy process of financial markets. You should not be alarmed at all.

Here is a quick fall 2015 economic outlook. We look forward to seeing you at your annual review meeting to further discuss these events as they pertain to your personal situation. In the meantime, never hesitate to contact us.

Please see the attached Economic Outlook – Fall 2015 from RBC GAM’s Chief Economist Eric Lascelles.

Key Highlights

– Oil Prices – Estimates indicate that West Texas oil prices can rise moderately, but probably not all the way back to US$60 a barrel in the near term;

– Financial-market weakness and volatility are naturally concerns at present, though we expect the former will fade. Commodity-oriented risks – mostly connected with resource-exporting countries and companies – may linger due to a fundamental supply-demand mismatch;

– Gazing into 2016, most regions should manage faster growth, though we have more conviction about this view for the developed world than emerging nations. In the developed world, North American growth prospects have been reduced, while the outlook for Europe and Japan is little changed. All appear on track for growth next year that is no worse than 2015, consistent with the economic-recovery narrative;

– The U.S. dollar continued to perform very well last quarter, but the greenback has been in a bull market for four years now and we feel confident declaring that the “easy money” has been made. To be clear, we’re still bullish on the U.S. dollar but are more tentative now, recognizing that the pace of the gains has been significant and that the currency is no longer undervalued.

– Global inflation remains very low and is likely to fall even more in the near term as the latest wave of oil-price weakness washes over the economy.

– In our view, the long-term case for stocks remains intact. Equity valuations were broadly fair before the downturn, but the decline has pushed equity markets below equilibrium, potentially providing an attractive entry point for investors. With stable earnings and the potential for rebounding valuations, total-return prospects for equities remain compelling.

Odette Morin

How to achieve inner peace in a volatile market.

market emotions

The other day a friend of mine said that the market has her “totally stressed”. She asked me how I cope.

“I’m not worried at all”, I said. “However, when I feel stressed, yoga and deep breathing really help.”

From her eye roll (a very exaggerated one I might add), I could see that Ujjayi yoga breath wasn’t the advice she was looking for.

So, for anyone feeling nervous about the recent market fluctuations, here’s some solid financial advice.


Seriously, take a breath. Don’t act or react. As I’ve mentioned in previous posts, markets always right themselves. Even during the two worst financial periods in recent history (the 1930’s and at the start of this century), stocks still bounced back eventually.

Do the math.

People are loss adverse – multiplied by two. According to Nobel Prize-winning psychologist Daniel Kahneman, loss yields about twice the psychological effect of an equivalent gain.

So, despite the fact that, over time, stocks yield more than they lose, we feel the loss twice as much as the gain.

It makes my left brain hurt.

Back away slowly and don’t make eye contact!

Given that we feel loss twice as strongly as gain, I suggest you avoid loss. Don’t check your portfolio daily. All the ups and downs will cause you more anxiety and prevent you from thinking rationally.

According to an article in the New York Times, checking your portfolio:

• Once a week means facing loss 43.7% of time

• Once a month means facing loss only 40.4 percent of the time

• Once a year means facing only 27.6 percent of the time

So check less often. Stay more peaceful (and more rational).

Don’t talk about it.

Because we feel loss twice as much as we do gain, talking about it with others suffering the same irrational anxiety is more likely to turn you into a psychological mess.

Hanging around the cooler and venting about the market is not self-help. Worse still, you leave yourself open to very bad advice.

Stay informed.

Read the finance section of reputable newspapers. Get educated about capital markets and asset classes.

The more you understand about how investments work, the better you’ll be able to accept, tolerate and manage risk. It’s also the perfect antidote to acting on impulse.

On a final note, you can always call or email us when you’re feeling unsure. We’ll happily talk through your concerns and make you feel at peace again (big eye rolls aside, I still think Ujjayi breathing isn’t such a bad idea!).

Terry Broaders

Weekly Update October 6 2015

“The Secret of Getting Ahead Is Getting Started” – Mark Twain


Marklets Move Higher On Energy
The North American stock markets pushed ahead Friday amid strength in metals and mining and energy issues. Toronto’s S&P/TSX composite index reversed an early decline that followed at weak U.S. jobs report to rise 97.85 points to 13,339.74. According to the U.S. Labor Department, employers added 142,000 workers in September, a much lower figure than the 200,000 anticipated on Wall Street. The jobs report sent U.S. government bond prices higher, which drove down the American dollar against most other major currencies. That included the loonie, which rose 0.52 of a U.S. cent to 75.96 cents. In New York, the Dow Jones industrial average rose 200.36 points to 16,472.37, while the broader S&P 500 added 27.54 points to 1,951.36 and the NASDAQ gained 80.70 points to 4,707.78. On commodity markets, the November contract for benchmark crude oil advanced 80 cents to settle at US$45.54 a barrel, while the December gold contract up $22.90 to US$1,136.60 an ounce.


Tax Preparer Extradited To Canada For Fraud
Canada has extradited a former tax preparer from Italy to serve a 10-year sentence for tax fraud, CRA says.  Doreen Tennina arrived in Canada September 4, and is now in custody.  On May 31, 2013, Tennina was found guilty in an Oshawa, Ont. Superior Court of 2 counts of fraud over $5,000 and was sentenced in absentia to 10 years in jail on each count.  Tennina, used to prepare taxes in Vaughan, Ontario. She fraudulently claimed carrying charges and charitable donations totaling $58,500,000 in 4,200 tax returns prepared on behalf of her clients from 2003 to 2005. The false claims reduced the amount of federal taxes owed by over $10 million. She was also ordered to pay a fine of $699,608 for failing to report income received from the tax evasion scheme, according to the court.  Taxpayers who claim false expenses, credits or rebates from the government are subject to serious consequences. They are liable not only for corrections to their tax returns and payment of the full amount of tax owing, but also to penalties and interest. In addition, if convicted of tax evasion, the court may impose jail time and fine them up to 200% of the tax evaded..



Market Update as of October 2 2015

North America
The TSX closed at 13326, down -53 points or -0.40% over the past week. YTD the TSX is down -9.68%.
The DOW closed at 16472, up 157 points or 0.96% over the past week. YTD the DOW is down -7.63%.
The S&P closed at 1951, up 20 points or 1.04% over the past week. YTD the S&P is down -5.20%.
The Nasdaq closed at 4708, up 21 points or 0.45% over the past week. YTD the Nasdaq is down -0.40%.
Gold closed at 1137, down -9.00 points or -0.79% over the past week. YTD gold is down -2.99%.
Oil closed at 45.61, up 0.05 points or 0.11% over the past week. YTD oil is down -13.44%.
The USD/CAD closed at 1.316072, down -0.0166 points or -1.24% over the past week. YTD the USD/CAD is up 12.15%.

The MSCI World closed at 1588, up 1.00 Points or 0.04% over the past week.  YTD the MSCI World is down -7.12%.
The Euro Stoxx 50 closed at 3088, down 25.00 points or -0.80% over the past week.  YTD the Euro Stoxx 50 is down 1.85%.
The FTSE closed at 6130, up 21.00 points or 0.34% over the past week.  YTD the FTSE is down -6.64%.
The CAC closed at 4459, down 22.00 points or -0.49% over the past week.  YTD the CAC is up 4.36%.
The DAX closed at 9553, down 136.00 points or -1.40% over the past week.  YTD the DAX is down -2.57%.
The Nikkei closed at 17725, down 156.00 points or -0.87% over the past week.  YTD the Nikkei is up 1.57%.
The Shanghai closed at 3053, down 39.00 points or -2.03% over the past week.  YTD the Shanghai is down -5.62%.


Sources: Bloomberg; Investment Executive;

Odette Morin

The investment risk no one’s talking about.


Right now, there’s a lot of talk about market volatility and its effect on investments. “Should I sell?” and “How can I avoid risk?” are questions we hear time and again.

Yet, the most important question is, “what’s my biggest risk?” In which case, my answer is inflation. Inflation will hurt your financial wellness and thwart your retirement plans more certainly than market volatility ever could.

Inflation is a sure thing.

Markets rise and fall. But, we prepare you for this with a balanced portfolio that can ride the ups and downs.

We make sure you have equities, which outperform over the long term, as well as fixed income and cash, for more consistent returns in the short term. As a result, your portfolio will have lower volatility than an all-equity portfolio. In addition, we make sure to diversify within asset classes – holding global as well as Canadian equities, for example.

Markets fluctuate always. What doesn’t fluctuate is inflation.

Inflation gets worse every year. Currently it runs at about 2.5%. So, to maintain the same purchasing power over time, you need to make at least that much on your investments.
You won’t get that with guaranteed investments.
The high cost of guaranteed investments.
They currently yield no more than 1 to 2% at best. With guaranteed investments, the only thing you can be certain of is steady financial decline.
Is that a cost you’re willing to pay?
In fact, you need a healthy dose of stock market volatility in your portfolio. It’s the only way to achieve the returns required to offset the devastating effects of inflation and hope to meet your retirement income objectives.
According to Justin Wolfers, senior fellow at the Peterson Institute for International Economics and professor of economics and public policy at the University of Michigan, stocks have risen throughout every decade since 1900.

In that time, there’ve only been only two exceptions: during the Great Depression and at the very beginning of this century.
Yet, even though we look back on those two times with terror, in reality the losses were fairly small. We also fully recovered by the next decade.
I truly believe those two exceptions caused greater damage to our psyches than to our income – which brings me to the subject of my next blog: How to achieve inner peace in a volatile market.

Stay tuned!

Terry Broaders

Weekly Update September 8 2015

“The Hammer of the Gods Will Drive Our Ships To New Lands” – Plant/Page


TSX Falls Amid U.S. Rate Uncertainty
Canada’s main stock index fell on Friday, weighed down by financial and energy stocks and jobs data. The Toronto Stock Exchange’s S&P/TSX composite index closed down 118.10 points, or 0.87 per cent, at 13,478.31. It lost 2.7 per cent on the week. U.S. stock indexes ended down more than 1 per cent on Friday after a mixed August jobs report did little to quell investor uncertainty about whether the Federal Reserve will increase interest rates this month.
The Standard & Poor’s 500 Index lost 1.5 per cent to 1,921.22. York. The Dow Jones Industrial Average fell 272.38 points, or 1.7 per cent, to 16,102.38.  It’s “a glass-half-empty kind of day,” said Patrick Blais, a fund manager at Manulife Asset Management Ltd. in Toronto. He helps manage about $280-billion at the firm. “Right now there’s a lot of nervousness so it’s natural for the market to react aggressively.”
There were 12,000 more Canadians in the workforce in August, a 0.1 per cent increase from July. However the unemployment rate was 0.2 percentage points higher than it has been for six consecutive months, reaching 7.0 per cent. Data Friday showed U.S. employers added 173,000 workers in August and the jobless rate dropped to 5.1 per cent.


Kids Are Draining Parent’s’ Nest Eggs
Adult children are relying on their parents for money, and this is putting a drain on the nest eggs of two-thirds of parents, finds CIBC.  In fact, 25% of parents are spending more than $500 a month to help their adult children cover expenses, such as rent, groceries and cell phone bills. Further, 47% say helping their kids financially has hampered their ability to save for themselves, and 20% have delayed retirement.  Where the money goes The most common form of financial support that parents provide their adult kids is free room and board at home (71%), but many contribute towards other bills as well, including: groceries/other household expenses (47%); cell phone bills (35%); car payments or vehicle related expenses (23%); rent for their adult kids to live elsewhere (17%); debt repayments (12%).  “Living at home temporarily can be a smart way for young adults to save for the future or pay down student loans,” says Christina Kramer, executive vice-president of Retail and Business Banking at CIBC. ”[But] these extra costs can be a burden that delay or prevent parents from meeting financial goals, and that’s why both parents and kids need to be mindful of their budgets.”


Blog Links

What The Heck is a Technical Recession


Market Update as of September 4 2015

North America

The TSX closed at 13478, down -387 points or -2.79% over the past week. YTD the TSX is down -8.65%.
The DOW closed at 16102, down -541 points or -3.25% over the past week. YTD the DOW is down -9.71%.
The S&P closed at 1921, down -68 points or -3.42% over the past week. YTD the S&P is down -6.66%.
The Nasdaq closed at 4684, down -144 points or -2.98% over the past week. YTD the Nasdaq is down -0.91%.
Gold closed at 1123, down -12.00 points or -1.06% over the past week. YTD gold is down -4.18%.
Oil closed at 46.04, up 0.68 points or 1.50% over the past week. YTD oil is down -12.62%.
The USD/CAD closed at 1.326744, up 0.0063 points or 0.48% over the past week. YTD the USD/CAD is up 13.05%.

The MSCI World closed at 1623, down 28.00 Points or -1.67% over the past week.  YTD the MSCI World is up -5.07%.
The Euro Stoxx 50 closed at 3180, down 107.00 points or -3.24% over the past week.  YTD the Euro Stoxx 50 is up 1.07%.
The FTSE closed at 6043, down 205.00 points or -3.28% over the past week.  YTD the FTSE is down -7.97%.
The CAC closed at 4523, down 130.00 points or -3.25% over the past week.  YTD the CAC is up 5.86%.
The DAX closed at 10038, down 222.00 points or -2.53% over the past week.  YTD the DAX is up 2.37%.
The Nikkei closed at 17792, down 1009.00 points or -7.02% over the past week.  YTD the Nikkei is up 1.96%.

Sources: Bloomberg; Investment Executive;

Odette Morin

Canada in a technical recession. What the heck is a technical recession and do we need to care?


Canada slipped in the “technical recession” territory in the first two months of the year as reported by Statistic Canada earlier this week. Economists say however that the contraction should be short-lived.

A “technical recession” just means that it has met the technical test of a recession which is two consecutive quarters of negative economic growth as measured by a country’s gross domestic product (GDP). So we are “technically” in a recession but other factors are required to establish recessions.

Recognizing how widespread the downturn was matters greatly. Did it affect a range of sectors in the economy, or was it confined to a few? Did the drop spread into other indicators, such as employment for example?

The main factor that dampened Canadian growth this year was the cyclical downturn in the price of oil.

Contrary to what is best reported in the media, there are plenty of signs that the trend of the economy was improving during the second quarter. Jobs grew steadily and the federal government ran a budgetary surplus in the second quarter. The declines in GDP so far this year were also microscopic.

The term “technical recession” has been widely use to demonstrate that this will unlikely be the beginning of a deep and long recession.

TD chief economist Beata Caranci says the benefit of the lower loonie to Canada’s export sector should boost growth in the third quarter. Caranci says that although exports were supposed to see a boost sooner, the sector’s sensitivity to the loonie has diminished over the past decade as the U.S. — Canada’s biggest trading partner — has been importing more from China and Mexico.

TD is forecasting economic growth in the 2% to 2.5% range in the third quarter, which Caranci says would make another rate cut from the Bank of Canada unlikely.

However, Capital Economics economist David Madani says he anticipates growth in the third quarter to be “unspectacular.”

Madani says business confidence indicators suggest the economy will continue to struggle in the second half of the year, even though it will return to positive growth.

So, we may be in a “technical recession” but modest growth is still expected.