JMRD Market Observer for December 8, 2017 – Year-end Tax Reminders

In This Week’s JMRD Market Observer

 

  • Year-end Tax Reminders

  • Forex- Can the Loonie Make a Comeback

  • Hot Charts – Canada: Best in a decade

  • JMRD Basket Corner

  • Retirement Corner

  • Reads of the Week

  • Economic Calendar

  • Earnings Reports

 

 

Year-end Tax Reminders

 

  • Last day for Tax Loss selling of Canadian Equities – Wednesday, December 27th, 2017 (Canadian Markets are closed December 25th  and 26th )

 

  • Last day for Tax Loss selling of U.S. Equities – Wednesday, December 27th, 2017

 

  • 2017 RSP contribution deadline – Thursday, March 1st, 2018. The 2017 maximum RRSP contribution limit is 18% of “earned income” in 2016, to an annual maximum $26,010. The 2018 contribution limit is a maximum of $26,230.

 

  • If you have turned 71 in 2017; December 29th, 2017 is the last day you can contribute to your own RRSP. Forms have been mailed to clients who are converting their accounts to a RRIF in 2018.

 

  • 2017 TFSA contribution deadline – Friday December 29th, 2016– contribution limit $5500.00.  The contribution can be made in cash or securities.

 

  • Note that the 2018 TFSA contribution limit has not yet been announced.

 

  • If you are planning a TFSA withdrawal in early 2018, consider withdrawing the funds by December 29th, 2017. The advantage is that you will not have to wait until 2018 to re-contribute that amount.

 

  • The last date to make an RESP contribution is Friday December 29th, 2017.

 

  • As a reminder, in order to benefit from the entire government grant, the contribution per child per year is $2,500. If there is unused contribution room and available grants, up to $5,000 can be contributed and still receive the full 20% grant.  If your child turns, or already turned 17 in 2017, this will be your last year to receive the government grant, which makes the December 29th deadline all the more important for you.

 

  • Deadline for making a charitable donation that can be claimed for the 2017 tax year is December 29th, 2017.

 

Year-end tax tips:

  1. Tax-Loss selling after a year of strong returns: It may seem odd to talk about tax-loss selling in a year in which the markets have been up and we have experienced some extreme highs. However, this is a great opportunity to sell a stock that has not performed well to offset any positions that have been sold or could be sold at a gain. Alternatively, you could take that loss, carry it back up to three calendar years, or even carry it forward for use in a future year.

 

  1. Shorter settlement period for equity trades. In September, Canada shortened its settlement period to coincide with T+2, or trade date plus two settlement days in American markets. So now, rather than having the previous three-day period, trades are settled in two days. The implication for investors is if you want to have a tax-loss sale before the end of 2017, then you actually have until December 27 to do so. In past years, this had to be done before the Christmas statutory holidays, but Canadian investors now have extra time.

 

  1. Don’t forget about donations: 2017 is the final year to claim the First-Time Donor’s Super Credit. Both the federal and provincial governments’ offer credits that can result in tax savings, but 2017 is the last year that you can claim the Super Credit if neither you or your spouse, or partner, have claimed any donations since 2008. Also good to note, any resulting capital gain on the donated securities will be eliminated, while in return you’ll receive a tax credit for the donation.

 

  1. Pay Family Medical Expenses: While expenses must be paid by December 31 to claim a tax deduction or credit in many cases, the related good or service does not always need to be acquired in the same year. This provides an opportunity to prepay certain items and claim the tax benefit currently. A tax credit can be claimed when total medical expenses exceed the lower of 3% of your net income or $2,268 in 2017. If your medical expenses will be less than this minimum threshold, consider prepaying expenses that you would otherwise pay in 2017. For example, if you expect to pay monthly instalments for your child’s braces in 2018, consider paying the full amount up front in 2017 if it will raise total medical expenses over the threshold. For medical expenses, it may be worthwhile to look for unclaimed expenses prior to 2017 as well. The medical expense tax credit (METC) may be claimed for eligible medical expenses that were paid during any 12-month period that ended within the calendar year (extended to 24 months when an individual died in the year.)

 

 

Forex- Can the Loonie Make a Comeback

 

Highlights

  • Even considering the low rate of U.S. inflation, monetary policy in the world’s largest economy is arguably too loose. It’s the first time since the 1970’s that real interest rates are in negative territory despite a positive output gap. Some Fed members are now even expressing concerns about financial imbalances fearing “a sharp reversal in asset prices” according to the latest minutes. Recently approved tax cuts by Congress also warrant normalizing monetary policy. As such, we believe the Federal Reserve will raise interest rates more than what markets are currently expecting in 2018. That translates to a comeback for the USD next year after a dreadful 2017 for the currency.

 

  • Boosted by a string of strong economic data in the eurozone, the euro had a good November even seeing its biggest jump in four months. While the European Central Bank’s asset purchase program will come to an end and interest rates will eventually return to positive territory, a major tightening of monetary policy is unlikely anytime soon due to the persistence of low inflation. We do not see a lot of upside for EURUSD from current levels over the forecast horizon.

 

  • The Bank of Canada just cannot ignore the strong labour market which created an average of 33K jobs/month in the last 12 months (including November’s massive +80K print), the best performance in a decade. We continue to think the central bank will be forced by strong data to deliver more interest rate hikes than what markets are currently expecting for 2018. As such, we would not be surprised to see USDCAD revisit 1.25 or even lower in early 2018 before a relapse back towards 1.30 later in the year as oil prices stabilize and an improving U.S. economy prompts markets to price more Fed rate hikes.

 

See the full article

 

 

Hot Charts – Canada: Best in a decade

 

It has been a stunning 2017 for Canada, in a good sense. Real GDP growth for the year is now expected to come in at around 3%, the best performance in six years. And as today’s Hot Charts show, employment creation this year was the best in more than 10 years, while (after this morning’s data) housing starts and the overall capacity utilization rate are both at a decade high. The Bank of Canada’s response has also been stunning, but not in a good sense, with two 180 degree turns during the year, first ditching its dovish tone in the summer amidst strong data before returning to its old ways right after September’s rate hike as the Canadian dollar jumped too high for comfort. The central bank’s caution, we’re told, is now based on NAFTA-related uncertainties and the economy’s enhanced sensitivity to interest rate hikes, concerns which we also share. But even then, do real interest rates have to remain negative given where we are in the economic cycle? As we pointed out before, one would be hard-pressed to find prior instances outside of a recession with a similar combination of a near-zero output gap and a negative real overnight rate. Negative real interest rates increase risks to financial stability by allowing the beast created by the Bank of Canada to get even larger ─ loose monetary policy has allowed household debt to surge to unprecedented levels, national house prices to double in the last 12 years, and residential investment to grow its share of GDP to a record high. And the solution to getting the beast under control cannot be to feed it further with negative real interest rates. As such we continue to call for tighter monetary policy in 2018.

 

See the full article

 

 

JMRD Basket Corner

 

DIG Basket

 

  • Algonquin Power and Utilities Corp: Investor day update and target increase. Growth pipeline expands; maintaining 10%/yr dividend growth target to 2021E See the full article
  • Capital Power: Sustainable 7% growth + power price upside See the full article
  • Dollarama: Continued quarterly progress; F2019 conservatism is a key question for investors See the full article

 

All-Cap Growth Basket

 

  • New Flyer: Complementary Manufacturing Acquisition Broadens North American Bus Footprint See the full article

 

 

Retirement Corner

 

 

 

Reads of the week

 

 

 

 

 

 

 

 

 

 

 

Economic Reports

 

Monday December 11th – None

Tuesday December 12th – PPI Nov (US)

Wednesday December 13th – MBA Mortgage applications (US)

Thursday December 14th – New home Price Index (CAD, Initial Jobless Claims (US)

Friday December 15th – Manufacturing Sales (CAD), Manufacturing PMI (US)

 

 

Earnings Reports

 

Monday December 11th – None

Tuesday December 12th – None

Wednesday December 13th – None

Thursday December 14th – None

Friday December 15th – None

Enjoy the weekend!

By | 2018-01-19T21:19:47+00:00 December 8th, 2017|JMRD Updates|0 Comments

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