**November 6th Issue of The JMRD Market Observer**
In This Week’s JMRD Market Observer
- 2015 Tax Season Reminders
- NBFM Forex – USD Close to Peak
- Asset Allocation Strategy: Comeback kid
- JMRD Basket Corner
- Retirement Corner
- Week at a Glance
- Reads of the week
- Economic Calendar
- Earnings Reports
2015 Tax Season Reminders
As we recently turned the page on another month and are now getting closer to the end of 2015, we thought it would be a good idea to get everybody thinking about TAXES again. You will find below some key dates and figures to have in the back of your mind when preparing for the upcoming tax season. Like last year, we will also feature a special “Tax Edition” email in the New Year which will include tax slip information as well as other helpful tax tips.
- 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
- Note, 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.
NBFM Forex: Will labour market deceleration deter the Fed?
Below is the latest installment of National Bank Financial’s monthly FOREX report
- Having repeatedly warned a rate hike was coming before year-end the Fed now finds itself, after October’s no-change decision, with one last shot to save face. But with inflation nowhere to be seen and the economy likely to face headwinds next year, the upcoming tightening cycle is likely to be brief. Another potential negative for the USD is the likely inclusion of the Chinese yuan in the IMF’s Special Drawing Rights. So, while the USD has room to run over the near term thanks to diverging monetary policy with the rest of the world, we believe it is close to peaking. We have, accordingly, adjusted our currency forecasts to reflect a weakening USD after 2016Q1;
- Across the Atlantic, inflation is also missing in action. At its October meeting, the European Central Bank made clear it is ready to expand stimulus if it gets confirmation that the timeline for inflation to return to its 2% target is being pushed back. New ECB staff projections are likely to show just that when they are presented in December, at which time we expect the central bank to either cut the already negative deposit rate or to increase the size of the QE program. That should take EURUSD closer to 1.05 by early next year;
- Like other major currencies, the Canadian dollar faces further headwinds amidst USD strength over the near term. The Bank of Canada, cognizant of the importance of export-led growth, will do its part to keep the loonie grounded through its communications. It could downplay the economic rebound underway and stick to its message about enhanced uncertainties with regards to the ability of Canada to fully capitalize on strengthening US demand. But the eventual erosion of yield disadvantage could mean a comeback for the loonie by mid-2016. So, while USDCAD should trade between 1.25-1.35 over the forecast horizon, we expect it to come close to the lower end of that range by the end of next year.
(Full report attached)
Asset Allocation Strategy: Comeback kid
October proved red hot for U.S. equities as the S&P 500 posted a return of +8.4%, which marks the best month since October 2011. All sectors were in the black, which is a tribute to the market’s breadth. Materials posted an impressive +13.5% return while energy recorded +11.4%, which is much needed relief for the two worst performers YTD. The S&P/TSX didn’t perform quite as well (+3.1%), as the index was weighed down by its healthcare sector (-45.8%).
Fear eventually receded as markets stabilized and the VIX decreased by 9.4% to close the month at 15.10%. 10-year U.S. treasury yields increased by 0.1% to close the month at 2.2%, while the Canadian dollar strengthened by 2.3 cents.
Asset allocation strategy
- December is still in the cards for normalization, barring any unforeseen events… but the pace of tightening will be much more gradual than previous tightening periods, which should reassure investors.
- ECB President Mario Draghi hinted that more action and further cuts could be on the way. Words are sometimes as powerful as actions when markets need to be reassured, and the dovish tone taken by Mr. Draghi should help boost investor confidence in the ECB’s seriousness for action in stimulating growth.
- We advise keeping Canadian equity exposure neutral/underweight, since energy products have still not emerged from their overproduction cycle.
- On the bond side, we expect yields to increase in anticipation of eventual Fed tightening. Bonds with lower durations and higher coupon rates should be favoured.
(Full report attached)
JMRD Basket Corner
Keyera (KEY) – KEY reported adjusted EBITDA of $188M on Tuesday, after the close, well ahead of NBF’s $166M estimate (Consensus: $165 mln) on stronger contributions from Marketing (iso-octane) and G&P. In addition, the company introduced its 2016 growth capital budget of $600M to $800M versus NBF’s previous assumption of ~$550M. In August, KEY entered into a 50/50 JV for the southernmost portion of the 20-inch diluent Grand Rapids Pipeline – providing proprietary access to at least 225 mbpd of additional diluent transportation capacity between Edmonton and Fort Saskatchewan (in-service H2 2017), representing a net investment of ~$200 mln, including additional connections to KEY’s Fort Saskatchewan Condensate System. (Full research note attached) KEY
All-Cap Growth Basket
Colliers (CIG) – On Tuesday, Colliers announced the acquisition of, Colliers International Atlanta. Founded in 1967, “Colliers International Atlanta stands as a recognized market leader for its commitment to clients, offering a full range of services for commercial real estate owners and occupiers. Comprised of more than 250 professionals, Colliers International Atlanta provides investment sales, lease brokerage, capital markets, property management and project management to local, regional, national and international clients.”
Stella-Jones – On Friday, Stella announced Q3 results that were above NBF forecasts on the back of strong performance in railway ties and residential lumber. Sales increased 21.2% y/y to $433.1 million vs. our $407.1 million estimate. Excluding FX, sales were up 5.2%. The top-line beat carried through to the bottom line with EBITDA of $68.8 million vs. our $64.5 million and EPS of $0.57 vs. our $0.54. (Full report attached) Stella-Jones
U.S. Growth Basket
Celgene (CELG) – “Celgene Swings to Loss Amid Acquisitions”
- “Who are the baby boomers?” (Globe and Mail)
Week At a Glance
See Week At a Glance report.
Reads of the Week
- “5 things that help protect investors from short sellers” (Financial Post)
- “The Unbelievable Power of Amazon’s Cloud” (The Atlantic) The company’s Web Services—which undergird Netflix, Healthcare.gov, and Spotify—might be the single most important piece of technology to the modern tech boom
Monday November 9th – Canadian Housing Starts
Tuesday November 10th – U.S. Wholesale Inventories, U.S. Wholesale Trade Sales
Wednesday November 11th – None
Thursday November 12th – Canadian New Housing Price Index, U.S. Initial Jobless Claims, U.S. Monthly Budget Statement
Friday November 13th – U.S. Retail Sales Advance, U.S. PPI Final Demand, U. of Michigan Sentiment
Monday November 9th – Northland Power, PrairieSky Royalty, Vermilion Energy
Tuesday November 10th – Alaris Royalty, Amaya Inc., Cineplex, Element Financial, Extendicare Inc, Innergex Renewable Energy, Painted Pony Petroleum, Whitecap Resources
Wednesday November 11th – Aecon Group, Boyd Group Income Fund, CGI Group, Dream Global REIT
Thursday November 12th – Canadian Tire Corp, Canadian Energy Services, Chartwell Retirement Residences, Gildan Activewear, Manulife Financial
Friday November 13th – Emera Inc, Enercare Inc, Power Corp of Canada, Tricon Capital Group
Have a good weekend!