MORE FROM YOUR MONEY                                                                                                       2025 4/4

 

Best of the season …

The Holiday season can be a busy one for most, and while the many celebrations, get togethers, and family time will take up most of our attention, I want to circle back to something I spoke of last quarter. If you recall, we touched on the concept of seasonality as it relates to equity markets, and how the expectation was that if we could get through September and October unscathed, November and December should prove to be strong. As many of you have seen, November was a good month for equities, and so far, December has been as well.  While there is no perfect indicator for market strength, I’m going to touch on why I think markets doing well “when they should” is a good sign.

 

Things are getting expensive…

No doubt, like myself, you have had some sticker shock while shopping this holiday season. Some of this “expensiveness” has started to show up in stock valuations as well. While somewhat concerning, I do think there’s a bit more to the story. As I’ve mentioned a few times this year, we are in the midst of one of the largest technological buildouts in history. This has been an all encompassing theme as it relates to stocks, and looks to continue, at least into the start of 2026. 

 

Markets behaving “as they should” is a good sign.  We have a strong theme (Data) and 2026 may bring some more positivity.  In general, investor sentiment has moved from complete fear in April to one of moderate optimism. This again is a good thing.  While it can lead to somewhat high valuations, it’s also an indicator of how comfortable investors are at embracing risk. We have also had some good news stories. The most recent earnings season was quite good, with very few ‘misses’, in terms of expectations. Now, in the U.S. at least, we have the potential for even more good news in 2026 as it relates to interest rates.

 

Becoming Dovish…

For those of you who listen to the many pundits on both TV and radio, you’ve no doubt heard the terms “dovish” and “hawkish”.  The former, when used to describe central bankers, refers to monetary policy designed to stimulate the economy, at the cost of potentially higher inflation. The latter is the opposite, and would indicate likely higher rates to ‘tame’ inflation. Over the last few years, we’ve certainly seen our share of both, but more recently, both in Canada and the U.S. we are seeing a move to a more “dovish” tone. This is interesting. We certainly have persistent inflation, however, it would appear, that concerns about the labour market are currently outweighing any worry about inflation. While it’s hard to know motives, we certainly have a good feeling about direction.

 

Lower rates, lower discounts…

A few years back we spoke about the discount function and how it relates to stock prices. While I won’t go into the calculus of the function again, I wanted to circle back to why this might be a good thing for stock prices. When valuing stocks, we are essentially looking at the value of all current and potential future earnings. We also consider the fact that generally speaking, a dollar today is worth more than a dollar in the future (this is due to inflation / and or growth). In general, as interest rates fall, we discount future value less. In essence, when interest rates are high, we place a lower value on future earnings, and as interest rates fall, the value we place on future earnings generally rises. Given the path of the FED and the Bank of Canada, it would appear that lower rates could be a tailwind for investors in 2026.

 

Time value and taxes…

Over the last year I’ve had some great conversations with many of you. One topic that consistently comes up is the idea of moving income higher in order to reduce estate taxes. While this can be a good idea, especially as we get into our later years, it’s very important to consider the time value of money. In a similar way to the aforementioned discount function, we should always consider that by increasing taxes too early, you can lose some of the “time value” of your money into perpetuity. 

Again, a dollar today is worth more than a dollar in the future. While prepaying estate taxes may save you 5-10% on your eventual estate tax, the money you pay to CRA will now be gone, and you will be unable to invest those dollars, potentially losing out on decades of investment returns. Something to consider. As always, every situation is very different, and in conjunction with your tax advisor we are always happy to help you save money…especially when it comes to CRA.

 

Tips and Tricks from the Admins…

Stay tuned for an updated format of this newsletter come 2026! In the meantime, we wish you a happy, healthy and peaceful Holiday Season.

 

Angela, Helen and Gigi

 

The Closing Bell…

It’s been quite a year. Looking back to our thoughts last year, we were mostly right…we knew it would be an eventful year, but also saw the great potential in the current investment themes. While 2026 is a bit more difficult to predict, I will say we continue to like the themes of data and energy, and with both the U.S. FED and the Bank of Canada looking to continue lowering rates, 2026 could turn out to be quite positive. Regardless, I want to wish all of you the very best over the holidays and take this time to thank you for your continued trust and support. Have an amazing holiday and a great start to 2026!  

 

I’ll leave you with a quote from one of my favourite holiday movies…

 

 

Going for a new amateur recreational saucer-sled land speed record, Clark W. Griswold, Jr., remember, don't try this at home kids. I am a professional.” — Clark Griswold

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Michael Van Berkel is an Investment Advisor with CIBC Wood Gundy in Barrie, Ontario. The views of Michael Van Berkel do not necessarily reflect those of CIBC World Markets Inc. Clients are advised to seek advice regarding their particular circumstances from their personal tax and legal advisors..