**December 18th Issue of The JMRD Market Observer**
In This Week’s JMRD Market Observer
- JMRD Strategy Comments
- A look back at 2015 and a look ahead to 2016
- What a difference a year makes – presenting the ‘NEW’ JMRD Wealth Management Team
- Let’s Get LinkedIn! Follow us on Twitter!
- 2015-2016 Tax Reminders
- Retirement Corner
- Life Insurance Corner- Why Life Insurance May Be Your New Best Financial Friend
- Week at a Glance
- Reads of the week
- Economic Calendar
- Earnings Reports
JMRD Strategy Comments
After a very turbulent fall, we were cautiously optimistic for the financial markets coming into December. 12 of the past 12 years had a positive performance in the last month of the year. We were wrong….so far.
The level of negativity in the markets this month has been extreme. There are a variety of things in the short term that are causing this. One is the year-end tax loss selling period that tends to cause the year’s worst performing companies to go down further as investors sell for tax losses. The other is the dramatic decrease in the oil price and its effect on Canadian energy companies and the Canadian economy in general. . The dramatic increase in the US dollar has also not helped equity markets. At some point these factors subside and some stabilization is seen. We believe a very pessimistic view is being priced in to many assets. We think that stabilization and some improvement could occur just from economic releases and information that are “less bad” than are currently being priced in. It does not take a series of fantastic positive economic releases, it just takes some reasonable numbers to change the tone.
We believe that there will still be global economic growth in 2016. We think the market is pricing in a chance of no meaningful growth. We will see in early 2016 as we get the important information and get some of the negative factors mentioned above out of the way. With the New Year comes new additional amounts allowed for RSPs, TFSAs and RESPs. We would take these opportunities to add to the holdings in your accounts to take advantage of some of the negativity in the markets. It is still prudent to make sure you are diversified geographically and have an overall asset allocation that reflects your risk profile. These swings in the markets offer the opportunity to re-balance accounts in an effort to buy things lower to get to the desired long term allocation to achieve your long term financial goals.
In the meantime, any day that the markets are open over the holidays, we will be here to answer any questions as we sort through the day to day fluctuations in the financial markets and what it means for our clients.
Have a fantastic holiday season with your family and friends.
Happy New Year to everyone!
The JMRD Wealth Management Team wishes you all the best in 2016!
The next two Fridays are holidays so the Market Observer will be taking two weeks off. In what will be the final edition of the year we wanted to focus on a number of items as 2015 was another year of significant change for the JMRD Wealth Management Team. Before we get to the investment comments, we wanted to review some very exciting developments and changes that have occurred over the past 12 months. Our Team is constantly striving to improve by adding new products and services to make our client offering and experience better. We feel 2015 was the MOST transformative year in JMRD’s history. Here is a short list why:
- Sarah Johnstone became a full member of the JMRD Team in our London office and has been working very closely with Reg on the day to day administrative tasks.
- Matt Aalbers also joined the JMRD team in our London office and has been instrumental in assisting Paul with financial assessments and other various projects like Tax Free Savings Account tracking. Matt is working more closely with Paul on daily client related activities.
- Joe Dibrita rounds out the new additions in London and his focus is on assisting Jaden with the launch of our new JMRD Models, coming soon. Joe is also developing a JMRD ‘Library’ which will contain factual information on client related topics.
- In Toronto, Morris Berghaus joined JMRD working closely with Zach Davidson. Morris brings over 20 years of experience to his role and from this extensive experience, he is an invaluable member of our team.
- We further improved our Financial and Estate Planning offering by working closely with Marie Blanchet, a high level Financial Planner and Camille Kanhai, a lawyer specializing in Estate Plans.
- Steve Lockner has continued to focus on insurance strategies for clients and 2016 will be a year to review your insurance needs as there are some taxation changes coming starting in 2017. We will be discussing these changes in more detail early in 2016.
- These changes result in the new Team having 12 members in three convenient locations to serve you better.
- For the second year in a row, your JMRD Wealth Management Team was named one of ‘Wealth Professional’ Canada’s Top 50 Financial Advisors. We were also named the Team of Year in the Southwestern Ontario Region for 2015.
New Products and Services!
- We continued to improve our website – www.jmrdwealth.com – here you will find back issues of the weekly Market Observer plus snippets of JMRD events and team members out and about in the Community.
- We are working on ‘YET’ another update on the website and that will be rolled out in the first quarter of 2016 – as always, your feedback is appreciated.
- Electronic statements. – Year TWO is in the ‘bank’ with the e-statements and several clients signed up to receive monthly reports this way. We expect further improvements to the on-line experience in 2016.
- If you are not currently set-up for online access to your accounts please contact Faith Hatt at firstname.lastname@example.org or any one of the Admin team to get started.
- 2015 was a huge year for social media – the main reason for the focus is our industry is finally embracing this form of communication and clear guidelines are being introduced.
- “We got LinkedIn” over the past few years but made it a focus in 2015.
- Most of the Team can now be found on LinkedIn which is a tool to stay connected with our clients and colleagues and share updates and timely information. Please feel free to “Link up” with us!
- Reg Jackson – http://ca.linkedin.com/in/regjacksonjmrd
- Paul Manders – http://ca.linkedin.com/in/pauljmanders
- Jaden Ropp – http://ca.linkedin.com/in/jadenropp
- Zach Davidson – http://ca.linkedin.com/in/zachdavidsonjmrd
- Catherine Sunga-Doucet – http://ca.linkedin.com/pub/catherine-suñga-doucet/7a/b0b/402
- Steve Lockner – http://ca.linkedin.com/in/stevelockner
- Matt Aalbers – http://ca.linkedin.com/in/matthewaalbers
- Sarah Johnstone – http://ca.linkedin.com/in/sarahjohnstone1
- Faith Hatt – https://ca.linkedin.com/in/faithhatt
- Joe DiBrita – https://ca.linkedin.com/in/joe-dibrita-9392a5108
- Twitter became a new tool for the JMRD Team and we plan on fine tuning how to use it more effectively in the coming 12 months – follow us at: @JMRDwealth
- We celebrated the two year anniversary of our new JMRD All-Cap Basket (ACB) which has exceeded all of our expectations.
- JMRD Model Portfolios – We are in the process of creating portfolios that combine three JMRD Baskets, global exchange traded funds (ETFs) and other complementary, well-known money managers tailored to suit each investment profile i.e. Conservative, Balanced, Growth or Maximum Growth.
We look forward to sharing all these new initiatives with clients in the coming year and encourage you to send us comments and suggestions on ways for us to improve further.
Top Investment Objectives for 2016 and Beyond
Our objectives have not changed from the last 5 years and we will simply repeat them here with relevant updates.
- Investors must continue to focus on their individual risk / reward profile.
- Protecting portfolio values to the downside and minimizing risk continues to be our primary objective for 2016 – preserve that capital
- We are constantly trying to avoid the ‘big mistake’ as we like to say in our investment committee meetings.
- Investors must have an investment plan and stick to that plan.
- Review your Investment Policy Statement (IPS) and ensure your asset allocation is up to date and appropriate. Please feel free to talk to us for clarification on this very important point.
- The ‘Annual Financial Planning Review’ and ‘Two Year Client Check-Up’ each client is set up for will provide timely opportunities for clients to review or implement plans.
- Focus on income and get paid to wait: for cash flow, invest in companies with growing dividends and interest paying securities. However, we would caution in ‘reaching’ for yield and only looking at a particular investment’s income but also the investment’s cash flow and strength of the balance sheet, in addition to other factors.
A primary focus for all investors should be capital preservation and income generation. Perhaps the single biggest surprise in 2015 was that the Bank of Canada cut interest rates twice which resulted in the Bank rate dropping to 50 basis points or ½ of 1%. This low rate flows through to GIC rates and other fixed income instruments resulting in extremely low cash flows from ‘guaranteed investment options’. What we saw in 2015 was investors stretching for yield and in some cases (preferred shares and some high-yield bonds) the results were negative. Coming up with strategies that deliver reliable cash flows will continue to be a challenge in the New Year.
Though conservative by definition, these top three objectives allow us to position portfolios conservatively, but this is not a call to reduce equity exposure.
We would also recommend that clients review the account type that they have. We are able to offer full discretionary accounts through our ‘Discretionary Portfolio Management Services’. Our models will exclusive under the Discretionary Portfolio arrangement and we will definitely be in touch with you if we feel that the model approach is a good fit for your portfolio. For more information on whether this fully discretionary approach makes sense for you specifically, please call to discuss.
2015-2016 Tax Reminders
- Last day for Tax Loss selling of Canadian Equities – Thursday, December 24th, 2015 (Canadian Markets are closed December 28th in lieu of Boxing Day)
- Last day for Tax Loss selling of U.S. Equities – Monday, December 28th,2015
- 2015 RSP contribution deadline – Monday, February 29, 2016. The 2015 maximum RRSP contribution limit is 18% of “earned income” in 2014, to an annual maximum $24,930. The 2016 contribution limit is a maximum of $25,370.
- 2015 TFSA contribution deadline – Thursday December 31, 2015 – contribution limit $10,000.00. The contribution can be made in cash or securities.
- Note that the 2016 TFSA contribution limit was just announced and was reduced to $5,500.
- If you are planning a TFSA withdrawal in early 2016, consider withdrawing the funds by December 31, 2015. The advantage is that you will not have to wait until 2017 to re-contribute that amount.
- The last date to make an RESP contribution is Thursday December 31, 2015.
- As a reminder, in order to benefit from the entire government grant, the contribution per child per year is $2,500. If by chance, there are unused grants from the past, $5,000 can be contributed and still receive the full 20% grant. If your child turns, or already turned 17 in 2015, this will be your last year to receive the government grant, which makes the December 31st deadline all the more important for you.
- “How much should we set aside for long-term care?” (Globe and Mail)
Life Insurance Corner
Why Life Insurance May Be Your New Best Financial Friend – Great tax benefits for holding companies and estate plans
Week At a Glance
See Week At a Glance Report.
Reads of the Week
- “Five investing lessons learned in 2015” (Globe and Mail)
- “What If You Only Invested In Stocks When They Were Cheap?” (The Irrelevant Investor)
- Morningstar Ultimate Stock-Pickers: Top 10 Best Performing Ideas Outperforming the market on a consistent basis continues to be a challenge for most active equity managers, and our Ultimate Stock-Pickers have certainly been adherents to this trend the past few years. With most stocks trading at or above our analysts’ fair value estimates from the middle of 2013 to the middle of this year, our top managers had maintained a much more cautious approach to the markets, making it difficult for more than a handful of them to make moves that would lead to outsized returns. While market corrections tend to provide active managers with an opportunity to outperform that has yet to be the case this year, as only a fifth of the 22 fund managers represented on our Investment Manager Roster are currently beating the market, as represented by the S&P 500 TR Index, which was down 0.3% on a year-to-date basis at the end of last week. There has been no index hugging this year, either, as there are few managers that are within 100 basis points of the index.
- NBF Hot Charts – Canada: Foreign investors give Trudeau a vote of confidence Canada Watch – Foreign investors flocked back to Canada in October by acquiring $22 billion of securities, the biggest inflow on record for that particular month. Non-residents were hardly scared off by the Liberal government’s decisive federal election victory and related pledges of deficit-financed fiscal stimulus. Foreign investors acquired an outsized $7.4 billion in Government of Canada bonds during October (alongside $1.5 billion in net buying of federal T-bills), leaving year-to-date purchases of Canada’s at a hefty $34 billion (net). As today’s Hot Chart shows, that’s the second fastest rate of net GoC bond buying on record. With net foreign buying of federal government bonds outstripping net issuance nearly 2:1 so far this year, the share of our sovereign bond market held by non-residents is still on the rise. This vote of confidence is good news for the federal government, given that net financing needs are set to move higher—due to erosion in the underlying budget balance and the new government’s planned stimulus.(full note attached) Hot Charts
Monday December 21st – None
Tuesday December 22nd – U.S. GDP Annualized, U.S. Personal Consumption, U.S. Existing Home Sales
Wednesday December 23rd – U.S. Personal Income, U.S. Personal Spending, U.S. Durable Goods Orders, U.S. New Home Sales, U. of Michigan Sentiment
Thursday December 24th – U.S. Initial Jobless Claims
Friday December 25th – North American Markets closed
Monday December 21st – None
Tuesday December 22nd – Micron Technology, Nike
Wednesday December 23rd – Monsanto
Thursday December 24th – None
Friday December 25th – None
Have a great holidays!