Welcome to Our Monthly Newsletter - Pharus Perspectives!

Welcome to this month’s edition of Pharus Perspectives — where we help make sense of the headlines, the markets, and the financial decisions that matter most.

As we move into the heart of summer, it’s a good reminder that successful financial planning isn’t just about navigating markets—it’s about making thoughtful decisions that can impact your family, wealth, and legacy for years to come. From estate planning and tax considerations to managing investment risk in uncertain markets, small decisions today can have a significant impact on future outcomes.

In this month’s issue, we explore several timely topics designed to help you stay informed and prepared:

Inside This Month’s Edition

• Smart Advice: Why “equal” isn’t always fair when it comes to inheritance planning and the important conversations families should consider before wealth is transferred
• Tax Planning: Understanding Canada’s anti-flipping tax rules and how short-term real estate transactions could affect eligibility for the principal residence exemption
• Investment Feature: An introduction to buffered ETFs and how these innovative investment solutions can help balance growth opportunities with downside protection
• Lifestyle Feature: Our Ultimate GTA Summer Bucket List—20 great experiences to enjoy before Labour Day

As always, if you have questions about any of the topics discussed or would like to explore how they may apply to your own situation, please don’t hesitate to reach out.

We hope you enjoy this month’s edition.

 

Monthly World Markets Report

Behind the Private Credit Headlines

Private credit has become an increasingly popular component of diversified portfolios, offering investors access to attractive income opportunities outside of traditional public markets. However, recent headlines surrounding rising defaults, redemption pressures, and the potential impact of artificial intelligence on software companies have raised questions about the asset class. While some concerns are valid, the broader picture suggests that many of the risks remain isolated rather than systemic.

Key Points

• Private credit has grown rapidly over the past decade as banks reduced lending to middle-market businesses following the Global Financial Crisis, creating an opportunity for private lenders to fill the gap.
• Investors are compensated for reduced liquidity through an “illiquidity premium,” often resulting in higher income potential than traditional public fixed-income investments.
• Recent concerns have centered on retail-focused private credit funds, where increased redemption requests have attracted attention. However, these funds are designed with redemption limits and liquidity controls that help prevent forced selling during periods of market stress.
• Artificial intelligence is creating new risks within the software sector. Some software companies financed by private lenders may face increased competition and pressure on future cash flows as AI lowers barriers to entry and accelerates product development.
• Technology-related risks represent only a portion of the private credit market. Many private credit strategies focus on senior secured lending, infrastructure, asset-backed finance, and other sectors that are largely unaffected by AI-driven disruption.
• Credit conditions are becoming more challenging. Default rates are rising modestly as higher interest rates and slower economic growth place pressure on some borrowers, making manager selection increasingly important.
• Systemic risk appears limited. Compared to traditional banks, private credit funds generally employ lower levels of leverage and operate with structural safeguards that reduce the likelihood of widespread market disruptions.

Investor Takeaway

Private credit is facing increased scrutiny as markets move later into the economic cycle, but the current concerns appear concentrated within specific sectors and strategies rather than the asset class as a whole. For long-term investors, private credit continues to offer compelling income potential and diversification benefits, provided investments are made with experienced managers that maintain disciplined underwriting and risk management practices.

We encourage you to read the full CIBC World Markets Report for a deeper look at the trends currently shaping the investment landscape.

 

Monthly Performance Update

Market Performance- May 31st , 2026
Index	1 Month	3 Months	YTD	1-Year	3-Year	5-Year
S&P TSX	2.5%	1.8%	10.6%	36.1%	24.6%	15.3%
S&P 500	5.3%	10.5%	11.3%	29.8%	23.6%	14.1%
NASDAQ	8.4	19.0%	16.1%	41.1%	27.8%	14.4%
MSCI EAFE	3.2%	-0.3%	9.7%	23.4%	18.7%	9.3%
MSCI Emerg.	9.7%	9.5%	25.7%	55.1%	25.8%	8.0%
MSCI World	4.4%	6.8%	9.8%	25.9%	20.2%	10.3%
FTSE Canada Bond	1.4%	-0.5%	1.7%	3.0%	3.99%	0.75%

Source: Click Here for Monthly World Market Report.

 

Model Research Observations

Global markets continue to be supported by a resilient, though gradually moderating, economic backdrop. Inflation pressures have generally eased from peak levels, allowing central banks to adopt a more balanced policy stance. While geopolitical developments and policy uncertainty remain important considerations, current conditions continue to align more closely with an ongoing expansionary environment than a recessionary one.

• Equities: Current market conditions suggest a constructive backdrop for equities over the medium term. Earnings growth, while still led by the U.S., is becoming increasingly broad-based, with improving trends emerging across Europe, Japan, and select emerging markets.
• Fixed Income: Government bond yields appear closer to fair value relative to recent history, reinforcing their role as portfolio diversifiers and sources of stability. Within credit markets, spreads remain relatively tight, suggesting a more selective approach may be warranted when assessing risk-adjusted opportunities.
• Alternatives & Real Assets: Real assets and alternative investment strategies continue to demonstrate their value as portfolio diversifiers, particularly in environments characterized by shifting economic and market leadership.
• Regional Observations: The U.S. remains a key driver of global economic growth, while earnings momentum and economic activity have shown signs of improvement across several developed and emerging market regions.
• Overall Perspective: The global expansion remains intact, although growth trends have become less synchronized across regions and sectors. This environment highlights the ongoing importance of diversification, disciplined portfolio construction, and maintaining balance across asset classes and investment styles.

 

Pharus Resources

Business Owner Spotlight: Succession Planning Starts Earlier Than You Think

For many entrepreneurs, their business represents their largest asset, retirement plan, and family legacy. Yet many successful businesses are not structured to maximize value when it comes time to sell or transfer ownership. Recent guidance from our team highlights why succession planning should begin years before a transaction is contemplated.

Key Considerations for Business Owners

Start planning early.

Succession planning is most effective when completed several years before a sale, family transfer, or retirement. Many valuable tax planning opportunities require advance preparation. 

Understand QSBC status.

To access the Lifetime Capital Gains Exemption (LCGE), shares generally must qualify as Qualified Small Business Corporation (QSBC) shares. Qualification is based on both current and historical tests, including asset composition over the preceding 24 months.

The LCGE remains a significant tax benefit.

For 2026, the LCGE is indexed to $1.275 million per individual, potentially allowing substantial tax savings on the sale of qualifying business shares.

Watch for excess passive assets.

Cash, investment portfolios, real estate, and other non-operating assets held inside a corporation can jeopardize QSBC eligibility. Addressing these issues often requires advance “purification” planning.

Family succession requires more than tax planning.

Owners transferring a business to the next generation should carefully consider ownership, control, fairness among children, and long-term governance. An estate freeze may help transfer future growth while maintaining control and preserving family wealth.

Intergenerational transfers have improved.

Recent tax rules may allow business owners to transfer a company to children while still benefiting from favorable capital gains treatment, provided strict conditions are met.

Integrate business and personal planning.

Succession planning should align with retirement income needs, estate objectives, insurance strategies, and overall family wealth preservation.

Key Takeaway

Succession planning is not simply about exiting a business—it’s about maximizing after-tax value, protecting family wealth, and maintaining flexibility for future opportunities. The most successful transitions typically occur when business, tax, estate, and wealth planning strategies are coordinated well in advance of a sale or transfer.

Source: Click Here for Full Details

 

Financial Planning Feature

Quick Home Flips Can Put the Principal Residence Exemption at Risk

For many Canadians, the principal residence exemption (PRE) is one of the most valuable tax benefits available, allowing gains on the sale of a primary home to be received tax-free. However, recent anti-flipping rules and increased CRA scrutiny mean that homeowners who buy and sell properties over a short period may find themselves facing an unexpected tax bill.

Understanding the Anti-Flipping Rules

Effective January 1, 2023, Canada’s anti-flipping rules were introduced to discourage short-term real estate speculation and help cool housing markets.

Under these rules:

1. Residential properties sold within 12 months of ownership are generally deemed to be inventory rather than capital property.
2. Any profit realized is treated as 100% taxable business income, rather than a capital gain.
3. The principal residence exemption cannot be claimed.
4. Certain life-event exceptions apply, including: 

• Death
• Disability
• Separation or divorce
• Employment relocation
• Serious illness
• Other qualifying circumstances beyond the owner’s control

While these rules only apply to sales occurring after 2022, the CRA has long had the ability to challenge transactions where it believes a property was purchased primarily for resale at a profit.

Case Study: When a Principal Residence Claim Was Denied

A recent Tax Court case highlights the risks.

A taxpayer purchased a pre-construction condominium in North Vancouver in 2015 and took possession in late 2017. The property was listed for sale shortly after possession and ultimately sold in 2018, generating approximately $457,000 in profit.

The taxpayer claimed the property as her principal residence and did not report the gain on her tax return. The CRA reassessed the transaction, arguing that the purchase and sale constituted a business venture rather than ownership of a long-term personal residence.

After reviewing the facts, the court sided with the CRA and ruled that the profit was fully taxable as business income.

Key Factors Considered by the Court

The court examined several indicators commonly used to determine whether a property sale is a capital transaction or a business activity:

• Short ownership period – The property was sold less than a year after possession.
• History of real estate transactions – The taxpayer had previously engaged in multiple property purchases and sales.
• Evidence of investment intent – Prior communications with the CRA referenced plans to generate income through property refurbishment and resale projects.
• Questionable occupancy – The court found insufficient evidence that the condo was genuinely used as the taxpayer’s primary residence.
• Property listed almost immediately after possession – The home was marketed for sale shortly after completion.
• Lack of normal residency indicators – No Wi-Fi installation, no address changes on government records, and marketing materials described the condo as “brand new.”

Main Takeaways

• The principal residence exemption is only available for properties held on capital account, not properties considered inventory for resale.
• Living in a property briefly does not automatically qualify it as a principal residence.
• The CRA looks beyond declarations and examines the facts surrounding ownership, occupancy, and intent.
• A short holding period is a significant warning sign, particularly when combined with other evidence of speculative activity.
• Prior real estate transactions and patterns of buying and selling can influence how the CRA views a sale.
• Since 2023, properties sold within 12 months may automatically be caught by anti-flipping rules unless a qualifying exception applies.
• Profits characterized as business income are fully taxable and do not qualify for the principal residence exemption.

Conclusion

The CRA continues to closely scrutinize short-term real estate transactions. Whether under the new anti-flipping rules or existing tax principles, taxpayers who purchase property with an intention to quickly resell for profit may find that gains they expected to be tax-free become fully taxable. For homeowners and investors alike, documenting the genuine purpose of ownership and understanding the tax implications before selling can help avoid costly surprises.

Source: Click Here for Full Details

 

CIBC Smart Advice Feature

Smart Advice Podcast Spotlight: When Equal Isn’t Always Fair

As Canadians prepare to transfer an estimated trillions of dollars to the next generation over the coming decades, conversations around inheritance, estate planning, and family wealth have never been more important. In a recent Smart Advice podcast, inheritance expert and bestselling author Dr. Tom Deans discussed why many families struggle with wealth transfer and how open communication can help preserve both family relationships and financial legacies.

Key Highlights

• Canada is experiencing a historic wealth transfer. With more than 8 million Canadians over age 65, approximately $300 million is being transferred between generations every day.
• Many Canadians remain unprepared. Nearly half of Canadians do not have a will, leaving important decisions about their estate to provincial legislation rather than their own wishes.
• Silence can create family conflict. One of the biggest estate planning mistakes is avoiding conversations about inheritance, wealth, and future expectations.
• “Equal” and “fair” are not always the same. Families often struggle when one child requires more financial support than another. Without transparency, gifts and inheritances can create resentment and misunderstandings among siblings.
• Giving while living is becoming increasingly popular. Many parents and grandparents are choosing to provide financial assistance today, helping younger generations with home purchases, education costs, and other financial challenges.
• Family meetings can make a significant difference. Structured conversations involving family members and trusted advisors can help clarify intentions, manage expectations, and reduce the likelihood of future disputes.
• Complex assets require careful planning. Family cottages, businesses, investment properties, and other illiquid assets often create challenges because they cannot be easily divided among beneficiaries.
• Estate planning is about more than death. Powers of attorney and incapacity planning are equally important, as many estate plans are first activated due to declining health rather than death.
• Professional guidance matters. Families who work with advisors, lawyers, and accountants tend to experience smoother wealth transfers and fewer family conflicts.

Key Takeaways

Successful estate planning is about more than distributing assets—it’s about preserving family relationships and ensuring your wishes are clearly understood. The most effective plans are built through open communication, thoughtful preparation, and ongoing family discussions. Starting these conversations early can help reduce uncertainty, prevent conflict, and create a legacy that benefits future generations both financially and emotionally.

We encourage you to read the full article here:

Source: Click Here for Full Details

 

Financial Insights

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.

Buffered ETFs – A Middle Ground Between Growth and Protection

Markets have demonstrated remarkable resilience over the past year, despite ongoing geopolitical tensions, trade uncertainty, and questions surrounding the path of interest rates. At the same time, many investors remain concerned about elevated equity valuations and the possibility of increased market volatility.

For investors seeking to remain invested in equities while managing downside risk, Buffered ETFs have emerged as an increasingly popular solution.

What Are Buffered ETFs?

Buffered ETFs are designed to provide exposure to stock market returns while offering a predetermined level of downside protection over a specific investment period, typically one year.

These funds use options strategies to create a “buffer” against market losses. For example, a Buffered ETF may protect against the first 10% or 15% of losses in a market index, while also placing a cap on potential gains.

In simple terms, investors exchange a portion of potential upside in return for some protection against market declines.

How Do They Work?

Consider a Buffered ETF linked to a broad market index with a 10% downside buffer and a 12% upside cap:

• If the market rises 8%, the ETF would generally participate in most of that gain.
• If the market rises 20%, returns would be capped at approximately 12%.
• If the market falls 8%, the buffer would absorb those losses, potentially resulting in little or no loss to the investor.
• If the market falls 20%, the first 10% decline would be buffered, with the investor participating in losses beyond that level.

The exact terms vary depending on the ETF and outcome period.

Types of Buffered ETFs

Today, investors can access a variety of Buffered ETF strategies, including:

• Broad U.S. equity exposure (such as the S&P 500)
• Technology-focused strategies
• International equity markets
• Enhanced protection strategies offering larger downside buffers
• Defined outcome ETFs with varying levels of upside participation and downside protection

These solutions allow investors to tailor risk and return expectations based on their individual goals and market outlook.

What This Means for Investors

Buffered ETFs are not designed to outperform the market during strong bull markets. Instead, they may appeal to investors who want to remain invested in equities while reducing the impact of potential market declines.

In today’s environment, where uncertainty remains elevated but long-term opportunities continue to exist, Buffered ETFs can serve as a valuable tool for balancing growth potential with risk management.

As always, the suitability of any investment strategy depends on an investor’s objectives, time horizon, and overall financial plan.

This newsletter is for informational purposes only and should not be considered investment advice. Investments involve risk and may not be suitable for all investors.

 

Fun Feature: The Ultimate GTA Summer Bucket List: 20 Things to Do Before Labour Day

Did you know? In last month’s newsletter, we asked how many people use Toronto’s PATH system daily. The answer was D — over 300,000 people! That’s enough people to fill the Rogers Centre several times over every single day.

The Ultimate GTA Summer Bucket List: 20 Things to Do Before Labour Day

Summer in the Greater Toronto Area is short, so why not make the most of it? Whether you’re a foodie, sports fan, adventurer, or simply looking for a reason to get outside, here’s a bucket list of experiences worth checking off before the leaves start to change.

• Take a Ferry to the Toronto Islands: Leave the city behind for a few hours and enjoy beaches, bike paths, and some of the best skyline views in Canada.
• Watch a Blue Jays Game: Even if you’re not a baseball fan, the atmosphere, food, and energy make for a classic Toronto summer experience.
• Visit a Farmers’ Market: Fresh Ontario strawberries, peaches, corn, and local treats are summer staples worth enjoying.
• Explore a New Neighbourhood: Spend a day wandering through Kensington Market, The Beaches, Roncesvalles, or Leslieville.
• Catch an Outdoor Movie: Pack a lawn chair and enjoy a film under the stars at one of the many free outdoor screenings across the GTA.
• Enjoy a Sunset Patio Dinner: Summer patios are one of Canada’s great seasonal pleasures. Bonus points if you can catch a sunset.
• Spend a Day in Niagara-on-the-Lake: Stroll the charming streets, visit local wineries, and enjoy the relaxed small-town atmosphere.
• Go to Canada’s Wonderland: Whether you’re a thrill-seeker or just there for the funnel cakes, it’s a summer tradition for many GTA families.
• Hike a Section of the Bruce Trail: Discover waterfalls, escarpment views, and some of Ontario’s most scenic landscapes.
• Attend a Summer Festival: Food festivals, cultural celebrations, music events, and neighbourhood street fairs happen almost every weekend.
• Visit the Toronto Zoo: A fun day for all ages and a great excuse to spend time outdoors.
• Rent a Kayak or Paddleboard: Explore Toronto’s waterfront, the Humber River, or one of the GTA’s nearby lakes.
• Try a Restaurant You’ve Never Been To: Toronto is one of the world’s most diverse food cities—summer is the perfect time to expand your culinary horizons.
• Take a Day Trip to Prince Edward County: Known for wineries, beaches, and small-town charm, it’s one of Ontario’s favourite summer destinations.
• Watch Fireworks: Whether on Canada Day or during local festivals, summer fireworks never get old.
• Visit a Local Conservation Area: Kelso, Crawford Lake, and Heart Lake are just a few nearby escapes from city life.
• Enjoy a Round of Golf: Take advantage of the long daylight hours and hit the links with friends or family.
• Go Berry Picking: Strawberries, raspberries, and blueberries are ripe throughout the summer and make for a fun family outing.
• See a Concert Outdoors:There’s something special about live music on a warm summer evening.
• Disconnect for a Day: Put the phone away, spend time with family and friends, and simply enjoy everything summer has to offer.

Key Takeaway

We often dream about faraway vacations, but some of the best summer memories can be made close to home. The GTA offers endless opportunities to explore, relax, and reconnect with the people who matter most. Consider this your challenge: how many items can you check off before Labour Day?

“Just as investing is about making the most of time, summer is too. Here’s hoping you make the most of both.”

 

 

 

 

 

 

 

 

 

 

 

 

 

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.

 

Pharus Wealth Advisory Group

The Beacon to your Financial Journey

1623 Avenue Road, Toronto ON M5M 3X8

Phone: 416 861-2460

Email: mailbox.pharuswealth@cibc.com

Website: www.pharuswealth.ca