**March 24th Issue of The JMRD Market Observer**
In This Week’s JMRD Market Observer
- The Federal Budget
- JMRD Basket Corner
- Retirement Corner
- Week at a Glance- Attached
- Reads of the week
- Economic Calendar
- Earnings Reports
The Federal Budget
With much anticipation, Prime Minister Trudeau released his first budget this week. In this abbreviated Weekly Market Observer we have attached a summary of the key points of the budget that affect individual tax payers, trusts and businesses. A sneak peek is provided below.
- Sales of Linked Notes
Budget 2016 proposes to amend the Income Tax Act such that the return on a linked note retains the same character whether it is earned at maturity or reflected in a secondary market sale. Specifically, a presumption rule will apply for the purposes of the rule relating to accrued interest on sales of debt obligations. This presumption rule will treat any gain realized on the sale of a linked note as interest that accrued on the debt obligation for a period commencing before the time of the sale and ending at that time. When a linked note is denominated in a foreign currency, foreign currency fluctuations will be ignored for the purposes of calculating this gain. An exception will also be provided where a portion of the return on a linked note is based on a fixed interest rate. In this case, any portion of the gain that is reasonably attributable to market interest rate fluctuations will be excluded.
For reference purposes, a linked note is a debt obligation, most often issued by a financial institution, the return on which is linked in some manner to the performance of one or more reference assets or indexes over the term of the obligation.
The reference asset or index can be a basket of stocks, a stock index, a commodity, a currency or units of an investment fund. This measure will apply to sales of linked notes that occur after September 2016.
- Taxation of Switch Fund Shares
Budget 2016 proposes to amend the Income Tax Act so that an exchange of shares of a mutual fund corporation (or investment corporation) that results in the investor switching between funds will be considered for tax purposes to be a disposition at fair market value. The measure will not apply to switches where the shares received in exchange differ only in respect of management fees or expenses to be borne by investors and otherwise derive their value from the same portfolio or fund within the mutual fund corporation (e.g., the switch is between different series of shares within the same class). This measure will apply to dispositions of shares that occur after September 2016.
- Restoring the Eligibility Ages of the Old Age Security Program
Budget 2016 proposes to restore the age of eligibility for Old Age Security and Guaranteed Income Supplement benefits to 65 by amending the Old Age Security Act and canceling the measures of the previous government. Budget 2016 proposes to increase the Guaranteed Income Supplement benefit for single seniors starting in July 2016
We have attached reports the highlights of the budget and how the federal budget will affect the Canadian Banks.
JMRD Basket Corner
All-Cap Growth Basket
Boyd Group (BYD) – Boyd Group hit a new high this week and Q4 sales topped estimates.
New Flyer (NFI) – New Flier also hit a new high after reporting earnings well ahead of the consensus estimates. See attached report. NFI
CGI Group (GIB.A) – See attached NBF report for a recent update from CGI Group’s Investor Day. CGI Group Inc.
Uni-Select (UNS) – Uni Select’s organic growth outlook is promising as are M&A opportunities. See the attached report. UNS Inc.
U.S. Growth Basket
Nike (NKE-US) – “Nike unveils its first self-lacing sneaker” (CTV News)
TransCanada Corp (TRP) – “TransCanada Said Working With JPMorgan on Power Asset Sale“ (Bloomberg)
WSP Global (WSP) – Marketing with new CEO provides us with strengthened outlook. See attached report. WSP Global Inc.
- “Federal budget to restore Old Age Security eligibility to 65” (Globe and Mail)
Week at a Glance
Full report attached.
Reads of the Week
- “How families can do Disney (and other destinations) on a dime” (Globe and Mail)
- Market Watch – The S&P/TSX has surged more than 12% since its January 20 low, the biggest rebound in over seven years. Oil prices have played an unusually large role in buoying Canadian equities. As today’s Hot Chart shows, the correlation between daily changes in the S&P/TSX and oil prices (WTI) currently stands at an historical high of 0.75. Canadian banks, who account for 23% of the equity benchmark (vs. 19% for the energy sector), have seen their correlation with the price of oil explode to 0.65 – also an historical high. See the attachment for more details. TSX and Oil
- “Warren Buffett brilliantly explains how bubbles are formed” (Business Insider)
- “We’re in a Bunny Market” (A Wealth of Common Sense)
Monday March 28th – None
Tuesday March 29th – Raw Materials Price Index MoM
Wednesday March 30th –
Thursday March 31st – GDP MoM, GDP YoY
Friday April 1st – None
Monday March 28th – None
Tuesday March 29th –
Wednesday March 30th – Dollarama Inc
Thursday March 31st – BlackBerry Ltd
Friday April 1st – None
Have a good long weekend!