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Anthony Sabti

Weekly Update – February 12, 2016

February 12, 2016 – Weekly Brief

TSX Rallies on Friday, Cutting into Earlier Losses as Oil & Financials Jump

The S&P/TSX Composite finished down again this week, but rallied on Friday with a 2.4%, 293.87 point jump, to finish trading at 12,381.24. The Friday uptick was the first positive finish for the TSX in 6 days. As one might expect, this positive finish was mainly driven by increases in the financial and energy sectors; however, all 10 of the TSXs main sectors were in the black on Friday.

Oil, which hit a 12-year low earlier in the week, rebounded strongly to finish the week only slightly down. Once again, renewed optimism over the possibility of an OPEC deal with other producers to cut supply led the to the rebound. From week to week, analyst sentiment seems to be flipping between optimistic and pessimistic on the future of an OPEC agreement. West Texas Intermediate saw future contracts rise 12%.

The Loonie finished the week at 72.22 cents to the US Dollar, up 0.5% for the week. Gold has been seen all year as a safe haven, and that sentiment did not change this week; indeed, Gold increased on the week to $1238.50 per ounce, up 5.5% for the week. Gold maintained its status trend as a safe haven, as evidenced by it’s nearly 11% increase year-to-date.

In the U.S., data from Friday revealed that consumer confidence has declined in February, with stock prices and the perception of weaker global conditions being front-and-centre in consumers’ thoughts. A difficult week in the U.S. markets did nothing to bolster consumer confidence either, as all markets were down for the week.

Much of the selloff was sparked on Wednesday, as U.S. Federal Reserve Chair Janet Yellen’s Tuesday remarks to Congress indicated a potential delay in further rate hikes. Worries about a softening U.S. economy were certainly not eased by these statements, and Wednesday saw a selloff in Europe and Asia which was followed by similar such selloffs later in the day in North America.

Many banks also scared investors, as plunging rates around the world have led to fears of decreasing profitability for banks; consequently, banks in Greece, France, Italy and Germany saw their stocks decrease. Sweden Central Bank “Riksbank” also added fuel to the fire with an additional rate cut, plunging the key Swedish rate to -0.5% from -0.35%.

Falling markets continue to offer a stellar opportunity for Canadians looking to invest for the long term. By adding to their current portfolios, investors in Canada can enjoy a lowered average cost base on their overall portfolio. To be sure, low oil prices are transferring money out of the hands of oil exporters and into the hands of oil importing countries.

Inevitably, that transfer will lead to increased spending by these importing countries. Increased spending will help the economy to grow, and the ensuing market rebounds will allow today’s investments to enjoy strong growth down the line. It cannot be stressed enough how opportune the timing is of the markets declining, as the RRSP contribution deadline for the 2015 Tax Year is a little over 2 weeks away (February 29th).

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Why A Bad Economy Can Make for a Better Lifestyle

Market Update as of February 12, 2016

North America

The TSX closed at 12381, down -383 points or -3.00% over the past week. YTD the TSX is down -4.67%.

The DOW closed at 15974, down -231 points or -1.43% over the past week. YTD the DOW is down -8.33%.

The S&P closed at 1865, down -15 points or -0.80% over the past week. YTD the S&P is down -8.76%.

The Nasdaq closed at 4338, down -251 points or -0.57% over the past week. YTD the Nasdaq is down -13.36%.

Gold closed at 1239, up 56.00 points or 5.54% over the past week. YTD gold is up 17.00%.

Oil closed at 29.08, down -1.77 points or -5.74% over the past week. YTD oil is down -21.51%.

The USD/CAD closed at 1.384803, down -0.0058 points or -0.42% over the past week. YTD the USD/CAD is up 0.08%.

Europe/Asia

The MSCI closed at 1469, down -80 points or -5.16% over the past week. YTD the MSCI is down -11.67%.

The Euro Stoxx 50 closed at 2756, down -123 points or -4.27% over the past week. YTD the Euro Stoxx 50 is down -15.67%.

The FTSE closed at 5708, down -140 points or -2.39% over the past week. YTD the FTSE is down -8.55%.

The CAC closed at 3995, down -216 points or -4.90% over the past week. YTD the CAC is down -13.85%.

DAX closed at 8968, down -512.00 points or -3.42% over the past week. YTD DAX is down -16.52%.

Nikkei closed at 14953, down -1867.00 points or -11.10% over the past week. YTD Nikkei is down -21.44%.

The Shanghai closed at 2765, up 1.0000 points or 0.04% over the past week. YTD the Shanghai is down -21.87%.

Sources: Globe Advisor, Yahoo! Finance, Dynamic Funds

Odette Morin

Why a bad economy can make for a better lifestyle.

The economy is suffering, but that doesn’t mean you have to. Instead, put your money toward a vacation, a boat, a beach house and – oh, and a dark, perfectly ventilated, temperature controlled wine cellar with nothing, but the finest reds…but I digress.

I know it sounds crazy, but the advice is sound and here’s why: stocks are low. When stocks are low, they inevitably and eventually increase in value. When you buy low, you can look forward to higher returns later.

In other words, if you invest now, you’ll have a greater return down the road. For anyone serious about retiring in style, this is the time to make that happen.

RRSP season is upon us. February 29th is the deadline. I strongly suggest you act now and think ahead.

I know that every year at this time we’re bombarded with RRSP messages. We’re always reminded of the immediate tax breaks and the rewards ahead. There are so many messages that we shut them out. But, this year, for your sake, please don’t. The greater your investment, the further your dollars go toward achieving your retirement goal.

To me, this is as exciting as a great Boxing Day sale. The difference is that this isn’t an opportunity that comes around every year. By next year, the deal may well be gone.

Stocks don’t stay low. They never do. In fact, here are just some highlights of how positively our market has recovered over the years:

  • In 1985, our market increased by 107% over 36 months
  • In 1995, it increased by 105% over 46 months
  • In 2003, it increased 168% over 68 months

In short, over the past 30 years, the S&P/TSX Composite Index increased by approximately 9% per year with 22 of those years ending with positive returns*. Bear markets usually recover within 9 months with an average loss of -28%. Meanwhile, the average length of a bull market is 50 months with an average gain of +126% **

What’s more, here’s some positive news to consider with regard to our forecast:

  • Our cheap dollar makes our exports very appealing to the US, our biggest customer
  • Positive effects of various government stimuli will show results in the next year or two
  • The price of oil has increased demand and increased demand helps bring up our prices

Just for fun, let me say again – invest now while prices are low because both the past and the future indicate they’ll all go back up again. Invest now and in a few years, you’ll be doing a happy dance (on your boat, in your beach house and in your wine cellar!).

Call us to make your contribution today and we’ll defer payment until the RRSP deadline on February 29th.

*Source: TD Asset Management Inc. and Morningstar En Corr

**Source Bloomberg S&P /TSX Composite data 1956 to 2015

Actually, the economy is great…

RRSP-2016-Camp-1

 

Terry Broaders

Weekly Update February 9 2016

“It’s Not Whether You Get Knocked Down, It’s Whether You Get Up” -Vince Lombardi

 

 TSX, Loonie Slightly Down on Dropping Oil, NASDAQ and Nikkei Slide This Week

The S&P/TSX Composite finished the week down slightly this week, ending a 2-week rally. Toronto’s main index finished at 12,763.99, once again hindered by oil prices. Oil finished the week at $31.00, down from last week on renewed skepticism surrounding an OPEC supply-cut deal.

Oil is still up from the 12-year lows it hit last month; however, renewed skepticism surrounding a possible OPEC/Russia/Oman production cut agreement, forecasts for warmer weather, and some lukewarm US economy forecasts both foresaw a further softening in demand while offering no concrete hope for supply-side stabilization. The Loonie finished at 71.86 cents per US Dollar, up slightly for the week. Gold increased for the 5th consecutive week, closing out at $1,174.10 on Friday.
In New York, the NASDAQ limped to the finish line, pummelled by weak economic forecasts and increased worries about over-valuation. The NASDAQ was down 3.25% on Friday, and 5.44% for the week, to 4,363.14. The slide was led by LinkedIn stock sliding as much as 46.5% on Friday, shaving $11 Billion off its market capitalization. The social networking site closed Thursday at $192.28 per share, yet opened Friday at $125.34 on the heels of a revenue forecast that was well below expectations. The slide continued toward finish line at $108.38, down 43.63% for the day. Year-to-date, the NASDAQ has suffered a slide of 12.86%.
The Dow Jones Industrial Average (DJIA) finished the week down 1.59% at 16,204.97. The S&P500 finished the week down 60 points (3.09%) to settle at 1,180.05.
In Asia, Japan’s Nikkei lost all of its gain and then some, finishing at 16,819.59, down almost 12% for the week. The Hang Seng fared only slightly better, also finishing the week in the red.

While all markets are down year-to-date, some stabilization appears to be setting in. As RRSP season ramps up toward the February 29th deadline, it is a great time to invest in RRSPs. Quality funds and equities remain available at steeply discounted prices, and could see a significant return in the years to come. The opportunity for the Canadian investor remains clear and present.

Is That Winter Trip to Florida a Tax Deduction ?   

Some folks will try just about anything to save tax. Case in point: “When a patient travels to a warm climate for the beneficial effects on his or her health, can the beneficial effects of the warm climate be considered a medical service” for the purpose of claiming the medical expense credit?

This question was recently put to the Canada Revenue Agency. Here is what CRA had to say. The Canada Revenue Agency’s view is that for the purpose of the Medical Expense Tax Credit, medical services are diagnostic, therapeutic or rehabilitative services that are performed by a medical practitioner acting within the scope of his or her professional training. Payments may be made to a medical practitioner or to a public or licensed private hospital for medical services provided to a patient. In other words, a service must be provided to the patient by a medical service provider. In the CRA’s view, the beneficial effects of a warm climate are not medical services as no service has been provided to the patient. Therefore, travel expenses incurred to travel to a warmer climate to receive those beneficial effects, even if for health reasons, are not eligible medical expenses.
In a word “No”.

This ruling was upheld by the Canada Federal Court of Appeal in Tallon v. The Queen, 2015.

 

Weekly Market Wrap Up as of February 5 2016

Norh America
The TSX closed at 12764, down -51 points or -0.40% over the past week. YTD the TSX is down -1.72%.
The DOW closed at 16205, down -261 points or -1.59% over the past week. YTD the DOW is down -7.00%.
The S&P closed at 1880, down -60 points or -3.09% over the past week. YTD the S&P is down -8.02%.
The Nasdaq closed at 4363, down 23 points or -5.44% over the past week. YTD the Nasdaq is down -12.86%.
Gold closed at 1174, up 20.00 points or 5.01% over the past week. YTD gold is up 10.86%.
Oil closed at 30.85, down -2.79 points or -8.29% over the past week. YTD oil is down -16.73%.
The USD/CAD closed at 1.390592, down -0.0091 points or -0.65% over the past week. YTD the USD/CAD is up 0.50%.

Europe/Asia
The MSCI closed at 1549, up 16 points or 1.04% over the past week. YTD the MSCI is down -6.86%.
The Euro Stoxx 50 closed at 2879, down -166 points or -5.45% over the past week.YTD the Euro Stoxx 50 is down -11.90%.
The FTSE closed at 5848, down -236 points or -3.88% over the past week.YTD the FTSE is down -6.31%.
The CAC closed at 4201, down 80 points or -4.89% over the past week.YTD the CAC is down -9.40%.
DAX closed at 9286, down 33.00 points or -5.23% over the past week.YTD DAX is down -13.56%.
Nikkei closed at 16820, down -698.00 points or -3.98% over the past week.YTD Nikkei is down -11.63%.
The Shanghai closed at 2764, up 26.0000 points or 0.95% over the past week.YTD the Shanghai is down -21.90%.

 

Sources: Bloomberg; Investment Executive;   advisor.ca,; yahoo finance

Odette Morin

What will your next statement reveal? Will you engage in Market Herding?

Odette’s Market commentary a must read to the end.

Herding

You will soon be getting your year-end statement in the mail and will immediately feel a sinking sensation. After a stellar 5 year period of market recovery and expansion, we see ourselves in negative territory over the past 12 months. “Here we go again” is what we’re thinking.

It never feels good to see the market value of your account go down. In fact, it is annoying and worrisome. Most of us will be tempted to react, adjust or capitulate. How quickly do we forget that markets are volatile and eventually correct. So, what do the markets know that we don’t? Or do the markets really know? Should we follow or stay the course? Let me go through a few facts first to help you see the big picture before being tempted to participate in Market Herding meaning if other investors sell, it must be because they know something we don’t. Thus, he sells, she sells, you sell, and so down go stock prices. Read more here.

We strongly feel that the markets around the world are currently oversold especially the North American markets. We predict a turnaround in 2016 & 2017. Beyond the “markets always recover” Here is why we feel confident about the year ahead:

• The CDN dollar is very low right now at about 70 cents compared to the US dollar. Canada is predominately an exporting country. A cheap dollar is great for Canada as it makes our products and services inexpensive. The Bank of Canada’s decision not to increase interest rates was a good one. Our main trading partner and buyer of our products is the US. The US economy is actually doing well which is going to be good for our exports.

• The government stimulus initiated last year will start to show results.

• The new Liberal government infrastructure stimulus will help our economy as well.

• The price of oil is ridiculously low. A steel barrel is currently costing more than the barrel of oil in it. Oil is currently at an irrational valuation. Low prices are the key to the market’s rebalancing, and so the latest drop should help accelerate the adjustment. Oil demand is growing and alternative energy, sadly for our environment, is way too expensive to compete. The challenge right now is that several OPEC members are still boosting their production, with Iran set to add yet more in 2016. This is lengthening the journey back to equilibrium for the oil market. Oil prices should gradually find their way higher with the higher demand.

• Concerns regarding China are reducing. While it is true that Chinese GDP is decelerating, the threat of a hard landing for the Chinese economy still seems fairly small. While a sharper devaluation of the currency is not impossible given significant capital outflows and China’s competitiveness challenges, we continue to believe that any further decline will be modest.

• For your investments, we are getting excited about the medium and long term opportunities that are beginning to reveal themselves with the recent declines. We are bullish for the year ahead. It is in fact a great time to make an investment and certainly great timing for those who will make an RRSP top up before the February 29th deadline.

I will close by simply reminding you that negative events like the market volatility we have been experiencing in the past few months create incredible investment opportunities. These TD Bank’s graphs below confirm this. In the past three decades alone, there have been a number of events that may have kept investors on the sidelines. When you look at the big picture, over the last 30 calendar years, the S&P/TSX Composite Index gained approximately 1316% or 9% per year and 22 of the 30 years had positive returns!

Investors who remained focused, invested and diversified have typically benefitted. The following chart illustrates historical downturns in the Canadian equity market and its subsequent recoveries.

All portfolios are not invested 100% in the stock markets. Your portfolio has mixture of fixed income and equities.

Finally, please read the following article from Oaktree capital. It just shows that the market does not know that much. This is the must read! Thank you for your confidence throughout the years. We work hard to stay on top to offer current recommendations and deliver consistent results.

As Terry and I always say, there is one rule that always works, buy quality and diversify.

Common sense is never as sexy as mass hysteria. MUST Read article here.

TD Graphs

Power_of_Staying_Invested_CAD

Excuses_Not_to_Invest

 

Terry Broaders

Weekly Update December 15 2015

“There Is No Chance The iphone Is Going To Get Significant Market Share” -Steve Balmer, 2007, Microsoft CEO

 

Pain on The Markets As Oil Falls Below U.S.$36

Another big drop in the price of oil sent North American equity markets into sharp retreat Friday in a sell-off that also took the commodity-sensitive Canadian dollar below 73 cents for the first time since mid-2004.In Toronto, the S&P/TSX composite index lost 1.7% of its value, closing down 226.64 points to settle at 12,789.95. The Canadian dollar, which has hit several new 11-year lows since it closed last week at 74.76 cents U.S., was down another 0.59 of a cent Friday at 72.77 cents U.S.
In New York, the Dow Jones average plunged 309.54 points to 17,265.21, while the broader S&P 500 fell 39.86 points to 2,012.37 and the Nasdaq shed 111.70 points to 4,933.47. Traders headed for exits as oil fell below US$36 a barrel in the wake of a report by the International Energy Agency that said the global oversupply of crude would continue until late next year. The January contract for benchmark U.S. crude oil was down $1.14 at US$35.62 a barrel.

 

Morneau Increases Minimum Down Payment For Homes Over $500K

Major changes to the minimum home down payment were announced Friday by Finance Minister Bill Morneau. The amount homebuyers must put forward as a down payment on houses over $500,000 will now be 10%. Homes under $500,000 will still only require 5% down payment.  This is a game changer especially in Vancouver and Toronto where a small condo often costs over $500,000. It’s a move designed to cool off the booming real estate market in some of Canada’s biggest cities.  The stiffer down payment requirement is one of three new measures targeting the stability of the housing market. The Finance Department has tightened mortgage rules on several occasions in recent years in an effort to weed out marginal buyers and excessive speculation in the housing market. One of the changes saw the federal government reduce the maximum amortization period for government-insured mortgages to 25 years from 30 years. The Bank of Canada has also expressed concerns that too many Canadians risk becoming over-extended, especially once interest rates begin to rise.   Note that the down payment is still 5% on the first $500k, even if the home cost is $700k.  For example if you buy a 700k home under the old rules, a 5% minimum down payment is $35k.  With the new rules it would be $25k (5%) on first 500k plus $20k (10%) on the next 200k = a 45k minimum down payment. So a buyer would need to come up with another $10k.  On a $999,999 home, the minimum goes from $50k to $75k; another $25k is required.

 

Market Update as of December 11 2015

North America
The TSX closed at 12790, down -567 points or -4.24% over the past week. YTD the TSX is down -13.31%.
The DOW closed at 17265, down -583 points or -3.27% over the past week. YTD the DOW is down -3.19%.
The S&P closed at 2012, down -80 points or -3.82% over the past week. YTD the S&P is down -2.24%.
The Nasdaq closed at 4934, down -208 points or -4.05% over the past week. YTD the Nasdaq is up 4.38%.
Gold closed at 1076, down -10.00 points or -0.92% over the past week. YTD gold is down -8.19%.
Oil closed at 35.51, down -4.60 points or -11.47% over the past week. YTD oil is down -32.61%.
The USD/CAD closed at 1.37352, up 0.0367 points or 2.74% over the past week. YTD the USD/CAD is up 17.04%.

Europe/Asia
The MSCI World closed at 1664, down 14.00 Points or -0.86% over the past week.  YTD the MSCI World is down -2.68%.
The Euro Stoxx 50 closed at 3203, down 128.00 points or -3.83% over the past week.  YTD the Euro Stoxx 50 is up 1.80%.
The FTSE closed at 5953, down 285.00 points or -4.58% over the past week.  YTD the FTSE is down -9.34%.
The CAC closed at 4550, down 165.00 points or -3.50% over the past week.  YTD the CAC is up 6.48%.
The DAX closed at 10340, down 412.00 points or -3.83% over the past week.  YTD the DAX is up 5.45%.
The Nikkei closed at 19231, down 274.00 points or -1.40% over the past week.  YTD the Nikkei is up 10.20%.
The Shanghai closed at 3435, down 90.00 points or -2.56% over the past week.  YTD the Shanghai is up 6.18%.

 

Sources: Bloomberg; Investment Executive;  Conference Board of Canada; advisor.ca,

Terry Broaders

Weekly Update December 8 2015

“Guns and Bombs, Rockets and Warships Are All Symbols of Human Failure” – President Lyndon B. Johnson

 

TSX Index Lags N.Y. Markets as U.S. Jobs Data Impresses

North American stock markets finished the Friday session higher led by a gain of nearly 370 points on the Dow after another month of solid U.S. jobs growth. Toronto’s S&P/TSX composite index was up 34.10 points to 13,358.77, ending the week of trading at practically the same level it began. The Canadian dollar was down 0.21 of a cent at 74.76 cents U.S.
Wall Street posted even bigger gains during the session helped by November data, which showed a gain of 211,000 jobs in the United States, suggesting that an interest rate hike is in the cards from the Federal Reserve at its meeting later this month. The Dow Jones closed ahead up 369.96 points at 17,847.63 while the broader S&P 500 index advanced 42.07 points to 2,091.69 and the Nasdaq rose 104.74 points to 5,142.27. “I think the Fed wants to at least start the path towards normalizing rates, but the market is satisfied that it will be done in a very gradual fashion,” said Patrick Blais, managing director and senior portfolio manager at Manulife Asset Management. “We’re sitting in a golden scenario where the U.S. economy is strong but not too strong.”  Canada’s economy is facing a different scenario.  Statistics Canada’s latest monthly jobs survey found the economy shed 35,700 jobs in November, while the unemployment rate crept higher by one tenth of a percentage point to 7.1 per cent.

 

Consumer Confidence Moves Up in November

Consumer confidence in Canada improved in November boosted by the first increase in Alberta in six months and a big jump in Atlantic Canada. The Conference Board of Canada said November 3 its index of consumer confidence rose to 103.1, up from 95.3 in October. The jump was the biggest gain since March. The increase came as the index rose in Atlantic Canada, Quebec, Ontario, British Columbia, and Alberta. However, it slipped lower in Saskatchewan and Manitoba. Conference board senior economist Julie Ades noted there can be some volatility from month to month. “A lot of the recent weakness in consumer confidence is attributed to people’s perception of future job prospects in their community,” Ades said.  Alberta, which has been hit hard by the downturn in the price of oil, saw a five point increase to 50.5, however the index was still nearly 50 points below its average for 2014.
Atlantic Canada saw the index increase 25.2 points last month to 156.4 for November as the balance of opinion in the region improved on all four of the survey’s questions. The index is based on how respondents perceive their current finances, future finances, and future job prospects, and whether they think it is a good time to make a major purchase.  Overall, those questioned were more positive about their financial situation as 16.9% said they were better off now than six months ago rose, compared with 16.5% who responded that way in October.  The proportion of those who said they expect to be financially better off six months from now increased to 23.1% from 21.6%. Those who said they expect to be worse off slipped to 16.5% from 17.2%.  The survey was conducted between Nov. 2 and 12.

 

Market Update as of December 4 2015

North America
The TSX closed at 13357, down -11 points or -0.08% over the past week. YTD the TSX is down -9.47%.
The DOW closed at 17848, up 34 points or 0.19% over the past week. YTD the DOW is up 0.08%.
The S&P closed at 2092, up 2 points or 0.10% over the past week. YTD the S&P is up 1.65%.
The Nasdaq closed at 5142, up 14 points or 0.27% over the past week. YTD the Nasdaq is up 8.78%.
Gold closed at 1086, up 13.00 points or 1.21% over the past week. YTD gold is down -7.34%.
Oil closed at 40.11, down -1.60 points or -3.84% over the past week. YTD oil is down -23.88%.
The USD/CAD closed at 1.336859, up 0.0006 points or 0.05% over the past week. YTD the USD/CAD is up 13.92%.

Europe/Asia
The MSCI World closed at 1678, down 22.00 Points or -1.50% over the past week.  YTD the MSCI World is down -1.84%.
The Euro Stoxx 50 closed at 3331, down 158.00 points or -4.54% over the past week.  YTD the Euro Stoxx 50 is up 5.86%.
The FTSE closed at 6238, down 137.00 points or -2.15% over the past week.  YTD the FTSE is down -4.99%.
The CAC closed at 4715, down 215.00 points or -4.37% over the past week.  YTD the CAC is up 10.35%.
The DAX closed at 10752, down 542.00 points or -4.80% over the past week.  YTD the DAX is up 9.65%.
The Nikkei closed at 19505, down 379.00 points or -1.91% over the past week.  YTD the Nikkei is up 11.77%.
The Shanghai closed at 3525, up 89.00 points or 2.58% over the past week.  YTD the Shanghai is up 8.98%.

 

 

Sources: Bloomberg; Investment Executive;  Conference Board of Canada; advisor.ca,