Welcome to Our Monthly Pharus Perspectives Newsletter!

As we begin the New Year, it’s clear that 2025 is off to an intriguing start. With market volatility making a comeback, the potential for a new Prime Minister in Canada by Spring, Trump back in the White House, and the possibility of a new trade war emerging for the first time in nearly five years, navigating these times can feel overwhelming. But don't worry—our team is here to provide you with strategic insights to help you stay ahead.

In this edition, we tackle some of the most pressing topics:

Tax Planning for 2025: Leverage expert advice to optimize your finances and stay ahead of the game.

Market Outlook for 2025: Uncover what the future holds for the markets and how you can strategically navigate the landscape.

Life and Health Insurance: Learn about the best practices and tips to protect yourself and your loved ones in the ever-changing insurance landscape.

Kick back, grab your favorite drink, and get comfy—we're about to dive into the exciting world of 2025. Uncover the opportunities, insights, and strategies that'll help you tackle this year's challenges head-on.

 

Monthly Markets Report

Take Five: Strong Returns Amid Unprecedented Challenges

In the past five years, global equity markets have faced unparalleled challenges, but resilience and adaptability have prevailed, rewarding patient investors with strong returns despite the chaos.

A Look Back

Early 2020 saw market panic due to the Covid-19 pandemic, causing economic shutdowns and market plummets. Governments and central banks intervened with extraordinary fiscal and monetary measures, stabilizing markets but leading to high inflation. The Russia-Ukraine war further disrupted energy and supply chains, with oil prices peaking above US$100/bbl in 2022. Inflation is now down to normal levels around 2%, thanks to rapid interest rate hikes by central banks.

Technological disruption and digital adoption accelerated, transforming industries at an unprecedented pace. Recently, the exponential growth in AI adoption has driven significant investment in AI-focused companies, propelling equity markets higher. However, the computational intensity of AI models raises sustainability concerns.

Trade dynamics have shifted towards deglobalization, prioritizing resilience and security over cost efficiency. Protectionism, especially in technology imports and exports, has intensified as governments safeguard critical industries.

U.S. Exceptionalism

Canadian investors allocating to U.S. equities have been rewarded over the past five years. The S&P 500 Index outperformed other major equity markets, driven by technology sector gains. Digital technology adoption surged during and post-pandemic, with generative AI capturing investor interest. Chipmakers and software stocks surged, contributing to strong U.S. equity market returns.

Canadian Context

The S&P/TSX Composite Index posted strong gains, outperforming many international indices but trailing the S&P 500 Index. The smaller technology sector contributed less to overall gains. Rising interest rates posed a headwind, with the 10-year Government of Canada bond yield increasing by nearly 250 bps since 2019. Interest rate-sensitive sectors like communication services and real estate faced challenges, with commercial real estate still affected by remote work trends. The energy and materials sectors contributed positively to the index's over 40% price return.

Bottom Line

Reflecting on recent history offers valuable lessons for investors. The global economy and markets faced unprecedented challenges, but those who stayed invested saw their wealth grow. The Covid-19 crash highlighted the perils of market timing, and those who avoided panic selling benefited from the rapid market recovery. Equity market resilience, especially in U.S. equities, was evident. Looking ahead, rising trade tensions, political uncertainty, and rapid technological changes will present both challenges and opportunities for investors.

 

Portfolio Strategy: Potential Optimizations to Adapt to New Trade Policies

As the United States welcomes a new president with a fresh perspective on trade, we've observed an uptick in global market volatility. Our commitment remains to adjust our clients' portfolios as necessary while keeping a close watch on policy impacts.

Fixed Income and International Equities: In the previous editions we talked about reducing weight to Fixed Income and International Equities but now we feel that the weights of Fixed Income and International Equities could be brought back up close to their neutral levels to mitigate potential risks arising from uncertainty and new trade policies. There is also the potential of a slight overweight in corporate bonds, with vigilant monitoring of the US fixed income allocation. Shortening the duration of the bond allocation looks relatively better especially for US bonds.

US Equity Allocation: Maintaining an overweight position in US Equities could be beneficial as the US economy and corporate earnings continue to remain resilient with further growth potential over the long-term.

Canadian Equity Allocation: Due to potential tariffs and the looming threat of a trade war, along with slower economy and uncertainty in domestic politics, it could be prudent to cut exposure to Canadian Equities.

Sector Positioning: Strategically focus on sectors poised to benefit the trade and economic policy shifts.

These tactical adjustments could optimize portfolio performance in the current economic environment. We remain committed to navigating these turbulent times with a focus on stability and growth for our clients.

Stay tuned for further updates as we continue to assess and adapt our strategy to meet evolving market conditions.

Market Performance – January 31^st, 2025

Index	1 Month	3 Months	YTD	1 year	3 Years	5 years
S&P TSX	3.5%	6.5%	3.5%	25.2%	10.0%	11.5%
S&P 500	2.8%	6.2%	2.8%	26.4%	11.9%	15.2%
NASDAQ	1.6%	8.5%	1.6%	29.4%	11.3%	16.5%
MSCI EAFE	5.2%	2.3%	5.2%	9.2%	5.7%	6.8%
MSCI Emerging Markets	1.8%	-1.9%	1.8%	15.3%	-0.3%	3.5%
MSCI World	3.5%	5.2%	3.5%	19.7%	7.8%	10.4%
FTSE Canada Bond Univ.	0.9%	2.2%	0.9%	6.90%	0.82%	0.33%

 

Source: Click here to access all market returns.

 

Special Feature: TFSA & RRSP Contributions

The Benefits of Contributing to RRSP and TFSA

When it comes to saving for the future, Canadians have two powerful tools at their disposal: the Registered Retirement Savings Plan (RRSP) and the Tax-Free Savings Account (TFSA). Both accounts offer unique advantages that can help you achieve your financial goals. As we approach the RRSP contribution deadline on March 3^rd, 2025, as a friendly reminder we wanted to outline the benefits of contributing to TFSA and RRSP Accounts.

 

Advantages of Contributing to an RRSP

Tax Deductions: Contributions to an RRSP are tax-deductible, which can lower your taxable income and reduce your tax bill.

Tax-Deferred Growth: Investments within an RRSP grow tax-free until withdrawal, allowing your savings to compound more efficiently.

Retirement Savings: RRSPs are designed for retirement savings, and withdrawals are taxed at your income level during retirement, which is often lower than during your working years.

 

Advantages of Contributing to a TFSA

Tax-Free Growth: Investments within a TFSA grow tax-free, and withdrawals are also tax-free.

Flexibility: Unlike RRSPs, TFSAs allow you to withdraw funds at any time without penalties, and the withdrawn amount is added back to your contribution room the following year.

No Impact on Benefits: Withdrawals from a TFSA do not affect eligibility for federal income-tested benefits and tax credits.

 

Contribution Limits for 2025

RRSP: The contribution limit for 2025 is **$32,490**, based on 18% of your earned income from the previous year, up to an annual maximum

TFSA: The contribution limit for 2025 is **$7,000**, with unused contribution room carried forward

Both RRSPs and TFSAs are excellent options for saving, but the best choice depends on your individual financial situation and goals. Consider consulting with a financial advisor to determine the best strategy for you.

 

CIBC Smart Advice Feature

It’s 2025: Do you Know What Your Tax Rate Is?

Tax rates fluctuate based on changes in government policies and your specific income type and level. Have you ever wondered what your tax rate will be in 2025? This comprehensive report will guide you through the intricacies of income taxation, helping you understand why the “advertised” tax rate often differs from what you actually pay.

Stay informed and prepared with our expert analysis! Please read the full Tax Guide here:

Source: Click here to read the article.

 

Financial Planning Feature

Making your retirement savings last for the long haul!

As Canadians enjoy longer retirements, careful financial planning has never been more crucial. This latest article delves into six smart strategies to help your retirement savings go the distance:

Realistic Retirement Planning: Break your retirement into phases and plan accordingly.

Debt vs. Savings: Balance paying down debt with investing for the future.

Inflation-Proofing: Invest in assets that outpace inflation to protect your purchasing power.

Adapt and Optimize: Continuously reassess and fine-tune your retirement plan.

Smart Investments: Consider income-generating and growth-oriented investments.

Government Benefits: Strategize the timing of benefits like CPP, QPP, and OAS for maximum payout.

Discover how these strategies can provide financial security and peace of mind throughout your retirement.

Source: Click here to read the detailed report.

 

Financial Solution Feature

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

As we embark on a new year, we encourage our clients to take a fresh look at their financial goals and plans. It's essential to regularly review our investment portfolios and financial strategies. One critical area that often gets overlooked is life and health insurance. Amid the hustle and bustle of everyday life, we sometimes forget the importance of protecting our families and ourselves, securing our incomes, and safeguarding our financial future. In the next two editions of Pharus Perspectives, we will explore the various types of life and health insurance and discuss strategies to effectively leverage these options.

Understanding Different Types of Insurance: Securing Your Future

As you consider your financial security and peace of mind, it’s important to understand the various types of insurance available. Here’s a quick overview of four key insurance policies: term and permanent life insurance, critical illness insurance, long-term care insurance, and disability insurance.

Term Life Insurance

Term life insurance provides coverage for a specified period, typically 10, 20, or 30 years. If the insured individual passes away during the term, the policy pays a death benefit to the beneficiaries. This type of insurance is generally more affordable than permanent life insurance and is ideal for individuals looking to provide financial protection for their loved ones during critical financial periods, such as paying off a mortgage or funding a child's education.

Benefits:

Affordable premiums.

Flexible term lengths.

Financial security for dependents during key financial milestones.

Permanent Life Insurance

Permanent life insurance provides coverage for the entire lifetime of the insured individual, as long as premiums are paid. It includes two main types: whole life and universal life insurance. These policies not only pay a death benefit but also build cash value over time, which can be borrowed against or withdrawn during the policyholder's lifetime.

Benefits:

Lifetime coverage.

Cash value accumulation.

Potential for policy loans or withdrawals.

Critical Illness Insurance

Critical illness insurance pays a lump sum benefit if the insured is diagnosed with a covered serious illness, such as cancer, heart attack, or stroke. The payout can be used for medical expenses, income replacement, or any other financial needs that arise during treatment and recovery.

Benefits:

Financial support during serious illnesses.

Flexibility in use of benefits.

Peace of mind knowing you have coverage for unexpected health crises.

Long-Term Care Insurance

Long-term care insurance covers the costs associated with long-term care services, such as nursing home care, home health care, and assisted living. This type of insurance is designed to help individuals who need assistance with daily activities due to chronic illness, disability, or cognitive impairment.

Benefits:

Coverage for a range of long-term care services

Protection of personal savings and assets

Ensuring quality care for yourself or loved ones

Disability Insurance

Disability insurance provides income replacement if you are unable to work due to an illness or injury. There are two main types: short-term and long-term disability insurance. Short-term disability typically covers a portion of your salary for a few months, while long-term disability can provide benefits for several years or until retirement age.

Benefits:

• Income replacement during periods of disability
• Financial stability during recovery
• Coverage for both short-term and long-term disabilities

 

Key Takeaway

In Summary Each type of insurance plays a crucial role in safeguarding your financial future and providing peace of mind. Whether you're looking to protect your family, secure your income, or ensure quality care, understanding these policies will help you make informed decisions tailored to your needs.

Pharus Resources Feature

Understanding Insurance in Canada: Your Key to Financial Security

In the ever-evolving landscape of financial planning, insurance plays a crucial role in providing security and peace of mind. Our latest article dives deep into the various types of life, disability, health, and critical illness insurance available in Canada, helping you make informed decisions about your coverage needs.

Explore the differences between term, whole, and universal life insurance. Understand the importance of short-term and long-term disability insurance and learn about the additional benefits provided by provincial and private health insurance plans. Plus, get insights into critical illness and long-term care insurance to ensure you and your loved ones are protected against life's uncertainties.

Don't miss out on this comprehensive guide to understanding insurance in Canada. Click the link below to read the full article and take the first step towards securing your financial future.

Source: Click here to read the detailed report.

Fun Feature

Fun Family Activities During March Break in GTA

March Break is the perfect time to explore and enjoy a variety of activities in the Greater Toronto Area (GTA). Here are some of the most popular and exciting options for families:

 

Unique Experiences

1. CN Tower’s Edgewalk: Experience the world’s highest full circle hands-free walk for thrill-seekers aged 13 and older.

2. Dine in a Heated Snow Globe at Selva: Enjoy delicious Thai fusion dishes in a cozy snow globe, complete with card games and Bluetooth speakers for family fun.

Educational and Fun

3. Royal Ontario Museum (ROM): Visit the special exhibition "Zuul" featuring a gnarly faced dinosaur, with hands-on activities and live performances.

4. Ontario Science Centre: Explore the "Our Climate Quest" exhibition and thrilling Omni films about dinosaurs, ancient caves, and asteroids.

Arts and Culture

5. SIX The Musical and Aladdin: Catch sensational Mirvish shows that will entertain both tweens and teens.

6. Art Gallery of Ontario (AGO): Enjoy free admission for those 25 and younger, with interactive art activations and karaoke at Walker Court.

Indoor Entertainment

7. Zed*80 Arcade: Play vintage arcade games for $10 a person, with a 2-for-1 deal on Wednesdays.

8. Pop-up Retro Arcade at Hotel X: Enjoy classic games like Street Fighter II and Ms. Pac-Man with an all-day play pass.

9. Ripley’s Aquarium and Rec Room: Spend a full day with activities ranging from virtual reality games to arcade classics.

Outdoor Adventures

10. Distillery District: Indulge in Après Ski Weekends with warm dishes and hot chocolate and explore the charming historic area.

11. Outdoor Skating Rinks: Enjoy DJ nights at The Bentway and Barbara Ann Scott Ice Trail, with hot chocolate available.

12. Hiking and Picnics: Explore Toronto trails or have a picnic at Rouge National Urban Park for a fun and budget-friendly activity.

 

To stay up to date on market events, news and reports, follow Pharus Wealth Advisory Group on our Social Media Pages. For Financial Literacy and Planning, visit Pharus Resources, where we upload timely articles on Financial Planning and Financial Literacy Resources.

 

Click here to visit Pharus Resources.

Pharus Wealth Advisory Group

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