A lot has happened in the first two weeks of August, so we wanted to take this opportunity to address this.

If you read our last comment, we were lamenting the under-performance of the Canadian dividend stocks. July was an excellent month, as Canadian dividend stocks took the lead in investors’ portfolios and outperformed most other asset classes. This rapid reversal of fortune is a perfect example of why a well-constructed portfolio will always have something that performs well in any market. 

The other side of the equation saw the large-cap growth names, that had dominated performance since last November, take a pause as their earnings forecast, on balance, failed to meet the lofty expectations (and valuations) of the market. The NASDAQ even posted a negative return in July! This “growth scare” saw a major rotation out of these momentum stocks into low volatility sectors of the market. We have seen these rotations before so we will see if it sticks.

 

Bonds had an excellent month as well as interest rates moderated with hints of further downward pressure on yields. 

 

Q2 earnings basically met expectations, which gave us a sigh of relief. There was some commentary by retail companies that referenced some weakness in the consumer but these readings can be incredibly fickle. There has been a number of weak economic prints and we have seen the Global economic leading indicators slip into negative territory but it is way too early to determine if this downward trend will persist. 

 

August through to October is typically the silly season where volatility often spikes and we have a modest correction, and rarely something worse. Going into this season we saw high valuations across asset classes, low volatility (as measured by the VIX), and most professionals fully weighted in risk assets. These are perfect conditions for ugly surprises. Well, that is exactly what we had on the August 5. A massive sell-off of equities that caught market participants by surprise. Some benign economic prints have skated the markets back onside but it does show how vulnerable the market can be to sudden shocks. 

 

After a brief hiatus in July the momentum trade is back on. This also means that valuations are high, spreads are thin, liquidity is plentiful. Caution is warranted. 

 

My Family's Success (Feature of the Month)

Investing in my family’s ventures in meaningful ways, as they make their own ‘dent’ in the universe.

 

Life sometimes presents ‘opportunities’ to support a family member in a venture with no potential of repayment. This might be a small business start-up or a career in the arts. Or it can be anything worthwhile that takes time and money to get that family member on their feet so they can make that ‘dent’ in the universe, like Steve Jobs often cited as his motivation.

 

Here are a sample of the questions we often ask:

1. What is the best way for my family to get off to a good start?
2. How do I protect the investment of my money and structure it so either a loan or partnership with clear boundaries?
3. What if I want to go in partnership with a family member? How do I structure that?
4. What can you do to insure low or no impact on my own Life Design?

OUR STORIES

 

Seed capital
A client, who is an entrepreneur, has a son, who also is an entrepreneur. Once we
ran the numbers, and provided the max number for investment, the father gave him
the seed capital. On our advice this was on a loan basis with an obligation to pay the
money back. It’s going well so far. However, if things don’t succeed, we're not sure that this
family would make their son pay for it. That being said, there is a provision in the will that
if something happens to the venture’s capital, it is owed to the estate or will be carved
out of the will.

 

We bring years of experience with a comprehensive 360-degree perspective, providing you with full context, numbers, and modeling to make informed decisions. Due diligence is crucial to avoid pitfalls like Ponzi schemes, so we create rigorous models to assess best- and worst-case scenarios, ensuring minimal impact on your Life Design. If needed, we can involve external legal and accounting experts to structure deals optimally, especially for "long-shot" investments, and special provisions can be included in your will. Understanding the emotional and financial complexities of family business partnerships, we emphasize the importance of entering these ventures with open eyes, prepared for potential repayment requests. Our coaching, backed by extensive experience and a strong network, ensures all parties are well-supported. If needed, we can connect you with trusted legal and accounting professionals and help assess private banking options for younger family members. Throughout, our top priority is your comfort with the risks and ensuring your best interests are looked after.

 

T.A.G. ...on a lighter note!

 

Peach Crisp is one of the joys of summer, and honey-sweet peaches need very little adornment, aside from this buttery crisp topping. Choose peaches that are just ripe for baking, as super-ripe peaches will turn into mush during this dessert’s long bake time. In this crisp, the peaches are peeled for the most luscious texture — and you can do so using a standard Y-shaped peeler (no need to boil a pot of water). That said, if you don’t have the time or energy to peel your peaches, you can leave them on for a slightly more rustic dessert. You may notice there aren’t any spices in this recipe, but vanilla, cinnamon and nutmeg all pair very nicely with peaches. 
(https://cooking.nytimes.com/recipes/1024392-peach-crisp)

 

T.A.G. Reading (...and Listening!)

 

The Dutch House, by Ann Patchett
Set over the course of five decades, The Dutch House is a dark fairy tale about two smart people who cannot overcome their past. Despite every outward sign of success, Danny and Maeve are only truly comfortable when they’re together. Throughout their lives, they return to the well-worn story of what they’ve lost with humor and rage. But when at last they’re forced to confront the people who left them behind, the relationship between an indulged brother and his ever-protective sister is finally tested.

Paris 1919: Six Months That Changed the World, by Margaret MacMillan
University of Toronto historian Margaret MacMillan failed at first to find a Canadian publisher for her account of the pivotal peace conference that followed the First World War and, some have said, laid the groundwork for the second, but when Paris 1919 won the Samuel Johnson Prize in the U.K., it returned home a bestseller and remained so for years. MacMillan, great-granddaughter of one of the conference's principals, David Lloyd George, has written a definitive history--authoritative, colourful, and engrossing--of the peace that failed.

It is remarkable to better understand that decisions made over 100 years ago still resonate today. 

 

T.A.G. Admin

 

RESP Withdrawals – September is all about Back-to-School. If you need help processing an RESP withdrawal for this year’s tuition fees, please contact Mara. If you are interesting in learning more about RESPs, feel free to visit out website for more information.