As we embrace the vibrant hues of Autumn, the excitement of a new school year, and the dynamic shifts in the market, there’s a lot to look forward to! In this thrilling edition, we uncover essential year-end tax planning strategies, reveal savvy investment tactics to navigate market volatility, and share some fantastic fall activities to enjoy. Get ready for a season full of insights and excitement!

 

Monthly Markets Report

 

Key Insights

 

As we step into September 2024, the financial landscape is marked by significant shifts and strategic opportunities. Investors are constantly analyzing economic news to gauge its impact on markets. Ideally, a strong economy boosts corporate profits and stock prices, while recessions hurt them. Interest rates play a crucial role: lower rates generally support higher equity valuations, as seen in the 2022 market sell-off during rate hikes. However, if rate cuts signal a weakening economy and potential recession, the outlook for equities may dim. The challenge is to balance controlling inflation with avoiding a recession, navigating between beneficial disinflation and harmful economic decline.

 

Let’s dive into more details:

 

Canadian Economic Insights and Outlook:

The Canadian economy is cooling and the themes from previous months of falling inflation, weak job numbers and anemic retail sales were prevalent. The Bank of Canada has been proactive, cutting rates to stimulate the economy. However, major Economists have shared concerns over BoC’s growth projections and expressed the need for further rate cuts as well as the possibility of larger cuts than the usual 0.25% to support economic momentum, drive real income gains, keep consumer spending robust and materialize a “soft landing”.

 

U.S Economic Insights and Outlook:

Economic data from the US has been mixed to say the least. While headline inflation continues trending in the right direction, recent data show an increase in Core CPI and PPI. Small business optimism has dipped and there are increasing signs of strain in terms of rising unemployment and softening consumer spending. The Federal Reserve has signaled a dovish departure from prior messaging, focusing more on employment rather than just inflation. This shift suggests a likely rate cut at this week’s FOMC meeting on Wednesday.

 

Eurozone:

The European Central Bank (ECB) lowered interest rates by a quarter point, marking its second cut in three months. This move aims to support the eurozone’s faltering economy. The ECB’s decision to reduce its key interest rate to 3.5% from 3.75% reflects a shift in focus from fighting inflation to supporting economic growth. Despite this, underlying inflation remains a concern, with core inflation at 2.8% last month.

 

Japan:

Japan’s economic stance adds to the bearish tone for risk assets. The Bank of Japan (BoJ) has emerged as the most hawkish central bank among advanced economies. The Bank of Japan’s unexpected rate hike led to a sharp strengthening of the yen, forcing investors to unwind their positions. This disrupts popular carry trades and impacts Japanese exporter revenues, causing a drawdown in Japanese stocks and market turbulence. However, the Bank of Japan’s commitment to market stability has helped the Nikkei recover.

 

Recession Risks: Monitoring the Signals

Concerns of a recession seem to be back. The recent unemployment trends coupled with an inverted yield curve for over a year has increased concerns of recession. Rising unemployment and softening consumer spending are key indicators to watch. Investors should remain vigilant and consider these risks when making investment decisions.

 

Market Performance: Equities and Bonds

Equity markets showed significant volatility in the start of both August and September but continued to show resilience in anticipation of rate cuts. The positive is that the gains are not limited to a few big names, we are seeing a broader performance, stronger in the value and defensive sector compared to Big Tech.

 

The equity markets are now near all-time highs and their valuations seem to be quite high. This poses some concerns and we have recently published an article taking “An analytical view” on Equity Market valuations which you can read here.

 

The bond markets have also enjoyed a good run showing signs of a healthy environment amid falling interest rates.

 

Portfolio Strategy: Maintaining Defensive Posture

As mentioned in our previous Perspectives, given the current economic uncertainties, we are maintaining a defensive portfolio posture. This includes focusing on quality and fundamentals and maintaining healthy diversification across asset classes, industries, and regions. We remain vigilant in cautiously finding opportunities in this falling rate environment to enhance returns. We will continue to monitor how the economy and markets unfold and will make appropriate shifts and adjustments to our portfolios to protect against and as well as take opportunities arising from market volatility.

 

Market Performance – July 31, 2024
Index	1 Month	3 Months	YTD	1 year	3 Years	5 years
S&P TSX	1.20%	5.60%	13.70%	18.80%	7.60%	10.60%
S&P 500	2.40%	7.40%	19.50%	27.10%	9.40%	15.90%
NASDAQ	0.60%	5.80%	18.00%	26.20%	7.70%	11.80%
MSCI EAFE	3.30%	4.60%	12.40%	20.00%	4.70%	9.10%
MSCI Emerg. Mkts	1.60%	6.10%	9.90%	15.50%	-2.70%	5.20%
MSCI World	2.50%	6.30%	15.50%	22.60%	5.20%	11.40%
FTSE Canada Bond Univ.	0.30%	3.90%	2.30%	7.90%	-0.72%	0.79%

 

Click here to access all market returns.

 

Investment Feature

 

In this section, we educate the reader on different investments. We discuss and elaborate each idea over a couple monthly editions. This section is not to be taken as specific investment advice.

 

Structured Notes: A Fascinating Investment Idea!

This month, our Investment Feature dives into the dynamic world of market volatility and unveils powerful strategies to navigate these turbulent waters. Over the next two months, we’ll explore the fascinating realm of Structured Notes, showcasing the diverse and innovative options available to savvy investors. Buckle up and discover how these financial instruments can help you stay ahead in the ever-changing market landscape!

Types of Structured Notes:

1. Principal Protected Notes (PPNs)
2. Principal At-Risk Notes (PARs)

In this edition, we will cover Principal Protected Notes and in the next edition we will dive deep into Principal At-Risk Notes.

Why Choose Principal Protected Notes?

PPNs are bank-issued debt obligations that provide investors with the dual benefits of bond protection and market growth potential. These notes are tailored to align with specific market views and risk tolerances, making them a versatile investment option.

Key Features and Benefits:

• Enhanced Income and Growth Potential: PPNs can be designed to offer minimum guaranteed returns, enhanced income, or long-term growth, depending on your investment needs.
• Capital Preservation: Enjoy 100% principal protection at maturity.
• Diversification: PPNs can be linked to a variety of asset classes, providing a diversified portfolio that complements long-term investment plans.
• Liquidity: These notes can be sold prior to maturity in a daily secondary market.

Investor Advantages:

• Increased Return Potential: Benefit from minimum guaranteed returns and long-term growth potential.
• Full Principal Protection: Your principal is fully protected if held to maturity.
• Performance-Linked Returns: Returns are based on the performance of various underlying assets, including equities and equity indices.
• No Currency Exposure: If the underlying asset is denominated in a foreign currency, there is no direct currency exposure.
• Daily Liquidity: The potential to liquidate through a daily secondary market.

Income and Growth Notes

Income and Growth Principal Protected Notes are deposit notes that provide full principal protection if held to maturity, with increased return potential based on the performance of the underlying asset. These notes rank equally with all other direct, unsubordinated, and unsecured indebtedness of the issuing institution, including its deposit liabilities.

Boosted Return Principal Protected Notes

Boosted Return Principal Protected Notes offer investors the chance to potentially outperform the reference asset while ensuring principal protection at maturity.

Boosted PPN Return Calculation:

• If the underlying asset/portfolio performance is between 0.00% and the specified Boosted Return, the investor will receive a return equal to the Boosted Return.
• If the portfolio performance exceeds the Boosted Return, the investor will receive a specified percentage of the excess performance as well.
• If the portfolio performance is negative, the PPN Return is zero, but the principal is still protected at maturity and the investor will receive their capital back in full.

 

Key Takeaway:

 

Structured Notes provide additional depth, diversification and color to your overall portfolio and asset-mix. It allows greater flexibility and customization of your investment portfolio to better attune to your financial goals. Whether you are looking for Income, Growth, Capital Preservation or a bit of everything, Structured Notes can play the crucial role to fine-tune your portfolio.

 

CIBC Smart Advice Feature

 

Achieve Better Tax Results in 2024 with Strategic Year-End Planning

 

This month’s Smart Advice Feature, we discuss year-end tax tips to maximize savings from CIBC. Below is a summary of the various strategies.

• Maximize RRSP Contributions: Ensure you contribute the maximum allowable amount to your Registered Retirement Savings Plan (RRSP) before the deadline to reduce taxable income.
• Utilize TFSA: Take advantage of the Tax-Free Savings Account (TFSA) to grow your savings tax-free. Contributions are not tax-deductible, but withdrawals are tax-free.
• Claim All Deductions: Review and claim all eligible deductions, such as medical expenses, charitable donations, and home office expenses.
• Income Splitting: Consider income-splitting strategies with family members to reduce the overall tax burden. This can include transferring assets or income to a lower-income spouse or child.
• Tax-Loss Selling: Offset capital gains by selling investments that are currently at a loss. This can help reduce the taxable amount on gains.
• Review Investment Portfolio: Rebalance your investment portfolio to ensure it aligns with your financial goals and risk tolerance. Consider tax-efficient investments.
• Defer Income: If possible, defer income to the next tax year to reduce the current year’s taxable income. This can be particularly useful for bonuses or other discretionary income.
• Plan for Next Year: Start planning for the next tax year early. Keep track of receipts and documents that will be needed for tax filing.

These tips can help individuals and businesses optimize their tax situation and maximize savings as the year comes to a close. Please feel free to read the whole article here:

 

Read the Article "Achieve better tax results in 2024 with strategic year-end planning"

 

Financial Planning Feature

 

CRA clarifies rules on Interest Deductibility

 

Understanding CRA’s Updated Rules on Interest Deductibility for Investments

 

The Canada Revenue Agency (CRA) has recently updated its guidelines on interest deductibility for borrowed funds used in investments. Key points include:

• Income-Earning Purpose: Interest is deductible if the borrowed funds are used to earn income from a business or property.
• Reasonable Expectation of Income: Investments must have a reasonable expectation of generating income, not just capital gains.
• Current Use of Funds: The current use of borrowed funds, not the original purpose, determines deductibility.
• Examples and Scenarios: The CRA provides detailed examples to clarify various investment scenarios.

 

Understanding the CRA’s new guidelines on interest deductibility is crucial for optimizing your investments. Stay informed to make better financial decisions and maximize your returns.

 

Read the full article “CRA clarified rules on interest deductibility"

 

Fun Feature

Experience the Magic of Toronto’s Fall Festivals!

As the leaves turn golden and the air gets crisp, Toronto comes alive with a spectacular array of fall festivals. Here are some must-visit events that promise to make this season unforgettable:

• Toronto Oktoberfest (September 27-28, 2024): Get ready for a Bavarian blast! Enjoy traditional German food, music, and, of course, plenty of beer. Don your lederhosen or dirndl and join the festive fun. Find more information here.
• Nuit Blanche (October 5, 2024): Experience an all-night contemporary art extravaganza that transforms Toronto into a massive, interactive art gallery. Wander through the city streets and discover stunning installations and performances that will leave you in awe. Find more information here.
• Toronto Pumpkinfest: Perfect for families, this festival offers pumpkin-themed activities, contests, and entertainment. From pumpkin carving to pie-eating contests, there’s something for everyone. Find more information here.

Don’t miss out on these incredible events that celebrate the city’s vibrant culture and community.

 

Pharus Corner

 

The Pharus Corner is a special feature with the purpose to keep you apprised of relevant updates on our Team, what’s going on in our lives and about upcoming events that we wish to host for you.

 

Currently we are requesting RSVP for our latest event:

 

1. Investment Landscape Overview and Private Equity Opportunities: We are inviting the globally renowned Private Equity asset manager KKR & Co Inc. along with CIBC Asset Management. They will delve into current investment trends, value creating strategies, fixed income opportunities and special insights on Alternative investments including Private Equity and leveraged buyout strategies. The event is scheduled for October 17^th, 2024, at CIBC Square. Dinner will be served for attendees. This is an exclusive event at a private dining space with breathtaking views.

Please let us know if you or any of your family member would like to attend the event.

 

Back-to-School Season served an important reminder.

 

Planning for education has never been more crucial with rising tuition costs and the growing importance of higher education. Whether you’re preparing for your own future or that of your children or grandchildren, understanding the key aspects of education planning can make a significant difference.

 

During this back-to-school season, we have received numerous inquiries about funding education costs. Unfortunately, we often find that a lack of prior planning can compromise other important life goals, including retirement. This underscores the importance of education planning and focusing on an integrated approach to Wealth Planning.

 

This prompted us to write a detailed article on everything related to Education Planning.

 

Read the full article “A Comprehensive Guide to Education Planning: Goal Setting, Strategies and Tax Implications”.

 

This comprehensive guide from Pharus Wealth Advisory Group covers everything from goal setting and investment strategies to tax implications, ensuring you’re well-equipped to make informed decisions.

 

Hope you enjoyed the read. For any Financial Planning, Investments or Insurance related questions, feel free to reach out to our office to get personalized assistance.