Category Archives: news

Market Update                                                                                                                 February -March 2023

                                                                        2022                                  YTD 2023 (at February 22/2023)

Canada’s TSX                                                <8.7%>                              +4.2%

U.S. S&P 500                                                 <19.4%>                            +4%

U.S. Nasdaq                                                  <33.1%>                            +9.9%

 Here in Canada, the central bank has given a pause and our Chief Economist believes that the Bank of Canada is indeed done.  He says inflation is declining at a 6% annualized rate. 

Meantime, employment is very strong and we are finishing up a reasonable quarter reported earnings.

We have been busy the last month dealing with a lengthy options maturity list.  With the pullback last year, most call options expired, and we have been busy rewriting calls to bring in more income.

TFSA/RSP

If you haven’t already, think about your TFSA and RSP contributions and remember that you can contribute cash or
securities. Think about growth securities that can grow tax-free and keep the dividend payors in your taxable accounts where in Canada, the dividend tax credit will apply.

LIRA

I have included a piece about LIRAs as an attachment to this Market Update.  If you have a LIRA, I hope you will find it an informative read.  

An important sidenote on provincially registered LIRAs, is that several jurisdictions allow for a one-time, 50% unlocking of a LIRA. 

By unlocking, I mean that you might be eligible to move half of your LIRA to an RSP where you would have complete control of the capital.  You could  invest it how you wish AND access as much of the capital as you wish – when you wish.

If a LIRA is unlocked, half of it can go to an RSP and half would have to go to a LIF and the LIRA would then no longer exist.  The LIF would start paying out a minimum or maximum amount as taxable income which is sometimes argued as a negative as it creates more taxable income.  However, unlocking part of your LIRA is about control and access to your LIRA capital versus additional taxable income when half of the LIRA goes to a LIF.  The payout scale on a LIF is similar in nature to that of your RIF. 

Please note that Federally registered locked-in pension plans have similar options for unlocking.  Feel free to contact my office with any questions about your LIRA options.

Reviews

My office is often attempting to review your portfolio three ways.  This might occur on the phone, by Teams (video) or in person, typically in our offices.  We have found some clients like the Teams video offering from the comfort of their homes, while others like to come into our offices.  If a member of my team or I contact you to review your portfolio, simply mention your preference and we will gladly accommodate your preference.

Office

Our office is now open for appointments – by appointment.  Call us to arrange any visits to our office.

I have prepared this commentary to give you my thoughts on various investment alternatives and considerations which may be relevant to your portfolio. This commentary reflects my opinions alone and may not reflect the views of National Bank Financial Group. In expressing these opinions, I bring my best judgment and professional experience from the perspective of someone who surveys a broad range of investments. Therefore, this report should be viewed as a reflection of my informed opinions rather than analyses produced by the Research Department of National Bank Financial. 

Best regards,

National Bank Financial

Rob Hunter

Senior Wealth Advisor

Sources:  Stockcharts.com, Reuters, Bloomberg, Globe & Mail,

National Bank Financial is an indirect wholly-owned subsidiary of National Bank of Canada. The National Bank of Canada is a public company listed on the Toronto Stock Exchange (NA: TSX).

This information was prepared by Rob Hunter, a Senior Wealth Advisor with National Bank Financial. The particulars contained herein were obtained from sources that we believe reliable but are not guaranteed by us and may be incomplete.

The opinions expressed are based on our analysis and interpretation of these particulars and are not to be construed as solicitation or offer to buy or sell the securities mentioned herein. National Bank Financial may act as financial advisor, fiscal agent or underwriter for certain of the companies mentioned herein and may receive remuneration for its services. Rob Hunter, National Bank Financial and/or its officers, directors, representatives, and associates may have a position in the securities mentioned herein and may make purchases and / or sales of these securities from time to time in the open market or otherwise.

The opinions expressed herein do not necessarily reflect those of National Bank Financial. Several of the securities mentioned in this article may not be followed by National Bank Financial’s Research department.

The securities mentioned (inclusive of option strategies) in this article are not necessarily suitable to all types of investors.  Please consult your investment advisor to discuss investment risks. All prices and rates are subject to change without notice. Stocks typically fluctuate in value. Stock values can go to zero.

Selling calls against stock (Covered Writing): Shares may need to be sold at the strike price of the option at any time prior to expiration. If the calls are assigned, further opportunity for appreciation in the underlying security above the strike price is foregone.

Risk/Reward of the strategy = Strike price minus the purchase price of the underlying plus the premium received from the sale of the call. The maximum loss is the same as holding a long position less the premium received.

The investment advice given only applies to residents of the provinces of British Columbia, Alberta, Manitoba, Saskatchewan, Ontario and Quebec.

National Bank Financial is a member of the Canadian Investor Protection Fund.

Market Update                                                                                                                 January 2023

                                                                        2022

Canada’s TSX                                                <8.7%>                             

U.S. S&P 500                                                 <19.4%>

U.S. Nasdaq                                                  <33.1%>

Brief 2022 summary:

Despite the weakness, the TSX outperformed the American market by the widest margin since 2005 last year.  In your portfolio, the Canadian side served up relative strength and it paid good dividends.  As we opened up from Covid, inflation set in with supply chain issues.  Recall, China as a major supplier and it’s  ‘0-Covid’ policy resulting in a long lockdown.  The response from the central banks, when it came, was swift with very rapid increases in interest rates designed to slow demand and price inflation.  Stocks, Bonds, Gold, Real Estate all fell last year.  Within losing market indices the winning sector was Energy and the loser Technology – an inverse outcome from a year earlier. In fact, energy was responsible for the TSX relatively outperforming the U.S. market last year.  Canada is primarily a resource economy with some very good banks thrown in.

A turning point?

Remember that the stock market is forward looking and doesn’t necessarily reflect the current economy.  The volatility we have been experiencing is a tug of war for direction.  The S&P 500 in the U.S. tried to rally several times last year and each time it failed to sustain a break-out higher, and it was because of either another interest rate hike or chatter from central bankers suggesting more rate increases were to come. This provided that sense of a yoyo market.

The end of a bear market has always occurred as the market not only breaks out higher, but sustains the move on the back of better sentiment.  I believe that positive sentiment will be fueled by the belief that the central banks are finally finished raising interest rates.  Many pundits believe that will occur in the first or second quarter of 2023.

Mr. Powell, at the Fed wants it to be more difficult to spend to get price inflation down.  In the U.S. he appears to not mind a forced recession. 

Bear markets historically, have tended to last around 13-15 months.  This one is 12 months old. The average draw down is about 27% (achieved only by the Nasdaq last year).  On average markets have recovered to previous peaks from troughs within 24-27 months.  See those waves in the chart above – all failed attempts to break higher?  Stay invested.  History suggests this is a short-term event and that one of those waves in the chart above will eventually break out much higher – with a 100% historical track record.  The magnitude of these interest rate hikes is unprecedented for the short period of time in which they have occurred, suggesting we are nearing an end to them.

2023…

Diversification.  The dividend payors will remain defensive in your portfolio.  As we approach January call maturities, I will be seeking longer-term calls in order to enhance income and capture premium as a hedge against potentially weaker call premiums in the first half of the year. 

I would also consider bringing in strike prices (the price at which you would have to sell stock) in order to further enhance up front income. This can be particularly useful in the U.S. market where, for  example, technology stocks don’t tend to offer much dividend income.

Here is an example.

SGEN trades at $133 at the time of writing this letter, with a consensus target of $165.

The January ’24 (1 year) $165 call is trading around $11.00 representing 8.2% upfront in income.  If assigned at $165, the total return would be 35%

Now if we reduced the call option strike to $150 for the same period, the call is trading around $16, representing 12% upfront in income.  If assigned at $150, the total return would still be 28%.

In this strategy, the investor gets more income, more downside protection from the call but not as much potential upside, arguably a more defensive approach. 

While the U.S. market appears oversold and could be considered a value play, invest with a mindset of a few years – not a few weeks.

TFSA contribution this year is $6,500.  I will be sending more separately on TFSA, RSP and yes, tax preparation dates in future letters.

Client lunch workshop.

It has been a long time since we have been able to gather together.  I am hosting a casual workshop in our Boardroom on Wednesday Feb 8^th at 1pm.   I will provide some sandwiches and present some ideas on investment and taxes  but also provide you an opportunity to ask any questions.  This meeting is for clients that have pre-registered with Maureen, though you are welcome to bring a friend with you.  Register with Maureen at 250 953 8415. 

Hockey Season.  I have tickets available in our National Bank Financial box at Save On Memorial Arena for both February  26^th and March 4^th on a first come, first served basis.  Clients interested in attending a Victoria Royals game are welcome to bring family and/or friends.  For more information, please call Campbell at 250 953 8422 who returns January 9^th.

If you have any questions or would like to discuss any aspect of your portfolio or market, my team and I are a phone call away.  In addition to our online meetings, we are now hosting client meetings again in our Victoria office by appointment.   

I have prepared this commentary to give you my thoughts on various investment alternatives and considerations which may be relevant to your portfolio. This commentary reflects my opinions alone and may not reflect the views of National Bank Financial Group. In expressing these opinions, I bring my best judgment and professional experience from the perspective of someone who surveys a broad range of investments. Therefore, this report should be viewed as a reflection of my informed opinions rather than analyses produced by the Research Department of National Bank Financial.

Best regards,

National Bank Financial

Rob Hunter

Senior Wealth Advisor

Sources:  Stockcharts.com, Reuters, Bloomberg, Globe & Mail,

National Bank Financial is an indirect wholly-owned subsidiary of National Bank of Canada. The National Bank of Canada is a public company listed on the Toronto Stock Exchange (NA: TSX).

This information was prepared by Rob Hunter, a Senior Wealth Advisor with National Bank Financial. The particulars contained herein were obtained from sources that we believe reliable but are not guaranteed by us and may be incomplete.

The opinions expressed are based on our analysis and interpretation of these particulars and are not to be construed as solicitation or offer to buy or sell the securities mentioned herein. National Bank Financial may act as financial advisor, fiscal agent or underwriter for certain of the companies mentioned herein and may receive remuneration for its services. Rob Hunter, National Bank Financial and/or its officers, directors, representatives, and associates may have a position in the securities mentioned herein and may make purchases and / or sales of these securities from time to time in the open market or otherwise.

The opinions expressed herein do not necessarily reflect those of National Bank Financial. Several of the securities mentioned in this article may not be followed by National Bank Financial’s Research department.

The securities mentioned (inclusive of option strategies) in this article are not necessarily suitable to all types of investors.  Please consult your investment advisor to discuss investment risks. All prices and rates are subject to change without notice. Stocks typically fluctuate in value. Stock values can go to zero.

Selling calls against stock (Covered Writing): Shares may need to be sold at the strike price of the option at any time prior to expiration. If the calls are assigned, further opportunity for appreciation in the underlying security above the strike price is foregone.

Risk/Reward of the strategy = Strike price minus the purchase price of the underlying plus the premium received from the sale of the call. The maximum loss is the same as holding a long position less the premium received.

The investment advice given only applies to residents of the provinces of British Columbia, Alberta, Manitoba, Saskatchewan, Ontario and Quebec.

National Bank Financial is a member of the Canadian Investor Protection Fund.

Market Update                                                                          December 2022

North American Markets have continued to rally after bottoming mid-October.  As the market believes that central banks are finished aggressive interest rate hikes to counter inflation, I believe the market will respond positively.

The S&P 500 Index is up nearly 15 per cent from the October lows at Nov 23.  Fundamentally, the S&P 500 index is now trading at a discount to its 10-year historical average.  Technically, since 1950, the S&P500 has never produced a negative one-year return following a U.S. midterm election (BNN Nov 23/22).

I continue to favour financial and energy sectors here in Canada as these sectors tend to perform well in an inflationary environment.  Expect technology (U.S.) to be weak until a transition to a more dovish interest rate policy, sometime I believe in 2023.  As a result, I suggest pushing out new U.S. call option maturities to maximize premium income while you wait.   

The U.S. has had an inverted yield curve for 22 weeks which historically has served as a strong predictor of recession.  Fast rising interest rates serve to squeeze the availability of money in the economy. Put another way, the Federal Reserve may be willing to risk recession as a cost of combatting inflation.  If so, I don’t believe it would be long in nature as most businesses are starving for more labour and you may have noticed the Canadian Federal government recently announcing that it wants to bring in much more educated labour via immigration. 

While all North American markets have been moving up out of October lows, the strength remains in Canada which is now down <3.95%> YTD

If you missed my charts comparing returns for banks, utilities, and technology stocks both YTD and over the last decade, you can view my October Update here:

https://rhunterwealth.ca/october-market-update-2022/

2023 TAX INFORMATION:

Working clients

• Maximum RRSP contribution: The maximum contribution for 2023 is $30,780; for 2022, it’s $29,210. The 2024 limit is $31,560.
• TFSA limit: In 2023, the annual limit is $6,500, for a total of $88,000 for someone who has never contributed and has been eligible for the TFSA since its introduction in 2009. The annual limit for 2022 is $6,000, for a total of $81,500 in room available in 2022 for someone who has been eligible since 2009.
• Maximum pensionable earnings: For 2023, the maximum pensionable earnings amount is $66,600 (up from $64,900 in 2022), and the basic exemption amount remains $3,500 for 2022 and 2023.
• Maximum EI insurable earnings: The maximum annual insurable earnings (federal) for 2023 is $61,500, up from $60,300 in 2022.
• Lifetime capital gains exemption: The lifetime capital gains exemption is $971,190 in 2023, up from $913,630 in 2022.
• Low-interest loans: The family loan rate until Dec. 31 is 3%.
• Home buyers’ amount: Did you buy a home? You may be able to claim up to $5,000 of the purchase cost, and get a non-refundable tax credit of up to $750. (Legislation is pendingthat would double the amount to $10,000 for a non-refundable tax credit of up to $1,500.)
• Medical expenses threshold: For the 2023 tax year, the maximum is 3% of net income or $2,635, whichever is less. For 2022, the max is 3% or $2,479.
• Basic personal amount: The basic personal amount for 2023 is $15,000 for taxpayers with net income of $165,430 or less. At income levels above $165,430, the basic personal amount is gradually clawed back until it reaches $13,521 for net income of $235,675. The basic personal amount for 2022 ranges from $12,719 to $14,398.

Older clients

• Age amount: You can claim this amount if they were aged 65 or older on Dec. 31 of the taxation year. The maximum amount that you can claim in 2023 is $8,396, up from $7,898 in 2022.
• OAS recovery threshold: If your net world income exceeds $86,912 in 2023 or $81,761 in 2022, you may have to repay part of or the entire OAS pension.
• Lifetime ALDA dollar limit: The limit is $160,000 for both 2023 and 2022.

Clients with children, dependants

• Canada caregiver credit: If you have a dependant under the age of 18 who’s physically or mentally impaired, you may be able to claim up to an additional $2,499 in 2023 and $2,350 in 2022 in calculating certain non-refundable tax credits. For infirm dependants 18 or older, the amount for 2023 is $7,999 and the 2022 amount is $7,525.
• Disability amount: This non-refundable credit is $9,428 in 2023 ($8,870 in 2022), with a supplement up to $5,500 for those under 18 ($5,174 in 2022) that is reduced if child care expenses are claimed.
• Child disability benefit: The child disability benefit is a tax-free benefit of up to $3,173 in 2023 ($2,985 in 2022) for families who care for a child under 18 with a severe and prolonged impairment in physical or mental functions.
• Canada child benefit: In 2023, the maximum CCB benefit is $7,437 per child under six and up to $6,275 per child aged six through 17. In 2022, those amounts are $6,997 per child under six and up to $5,903 per child aged six through 17.

Federal tax brackets

Federal bracket thresholds will be adjusted higher in 2023 by 6.3%.

• The 33.0% tax rate begins at taxable income of over $235,675, up from $221,708 in 2022.
• The 29.0% tax rate begins at taxable income of over $165,430, up from $155,625 in 2022.
• The 26.0% tax rate begins at taxable income of over $106,717 up from $100,392 in 2022.
• The 20.5% tax rate begins at taxable income of over $53,359, up from $50,197 in 2022.
• Income up to $53,359 is taxed at 15.0%.

Christmas & New Year’s Office Closures:

Our office will be closed Monday December 26th, Tuesday December 27^th, and Monday January 2nd (2023)

If you have any questions or would like to discuss any aspect of your portfolio or market, my team and I are a phone call away. 

I have prepared this commentary to give you my thoughts on various investment alternatives and considerations which may be relevant to your portfolio. This commentary reflects my opinions alone and may not reflect the views of National Bank Financial Group. In expressing these opinions, I bring my best judgment and professional experience from the perspective of someone who surveys a broad range of investments. Therefore, this report should be viewed as a reflection of my informed opinions rather than analyses produced by the Research Department of National Bank Financial.

Best regards,

National Bank Financial

Rob Hunter

Senior Wealth Advisor

Sources:  Stockcharts.com, Reuters, Bloomberg, BNN, Advisor.ca

National Bank Financial is an indirect wholly-owned subsidiary of National Bank of Canada. The National Bank of Canada is a public company listed on the Toronto Stock Exchange (NA: TSX).

This information was prepared by Rob Hunter, a Senior Wealth Advisor with National Bank Financial. The particulars contained herein were obtained from sources that we believe reliable but are not guaranteed by us and may be incomplete.

The opinions expressed are based on our analysis and interpretation of these particulars and are not to be construed as solicitation or offer to buy or sell the securities mentioned herein. National Bank Financial may act as financial advisor, fiscal agent or underwriter for certain of the companies mentioned herein and may receive remuneration for its services. Rob Hunter, National Bank Financial and/or its officers, directors, representatives, and associates may have a position in the securities mentioned herein and may make purchases and / or sales of these securities from time to time in the open market or otherwise.

The opinions expressed herein do not necessarily reflect those of National Bank Financial.

Several of the securities mentioned in this article may not be followed by National Bank Financial’s Research department. The investment advice given only applies to residents of the provinces of British Columbia, Alberta, Manitoba, Ontario and Quebec. National Bank Financial is a member of the Canadian Investor Protection Fund.