Monthly Debrief Oct 2024
Our Monthly Debrief video is a summary of all the information that we would like to share with you in an effort to provide an update.
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Monthly Debrief
October 2024]
Leanne: Hello and welcome to October's monthly debrief. My name is Leanne Mamchur and this is all the information that I've either read, listened to, or heard in person from our analysts, economists, and underlying institutional portfolio managers that I thought I would share with you.
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Image: Leanne and her two daughters
Speaking at the Canadian Women’s Expo
(with my little helpers)
]
Leanne: But before we jump in, I just wanted to share a little quick picture. I had the opportunity to speak on stage at the Canadians Women's Expo and these were my little helpers. And so they're trying to raise, well, I asked them to raise a thousand dollars in order to go to one of the Lands Mario Land or Disneyland or what have you. I think that little entrepreneurs are always good to raise in children, and so then they're here working for me on stage. And so it was really cute. It was a really fun experience.
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Economics
In Canada
- Continued economic challenges
- Growth has slowed, still positive
- GDP per Capita (avg person earning less and spending less, but is staying hidden as the population has increased.
In China:
- China announced some stimulus, that may help stabilize
]
Leanne: Alright, so onto the economics in Canada, we're seeing continued economic challenges and we're actually seeing our productivity drop off a little bit on a per person basis. Now we are seeing that this is being hidden by the increase that we've seen in our population of late, and so it's not as shown, but if we don't change it as a nation, this could really hurt our economy and change our living standards on a per person basis. And so it is a number that we're looking at and that is quite an interesting one for us. Growth has slowed here in Canada, but it is still positive, which is nice to see. So we're not in a recession or anything like that, but we are seeing slow growth. Just a quick note on China. China has had a little bit of a hard go and we have been seeing some or China announced some stimulus that might help them stabilize their economy a little bit.
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Economics
In USA:
- Unemployment gone up to a level that is typically a recession indicator
- With a deeper look, this may be due to increase in labour market (including immigrants)
Soft landing probability increased
- Recession likely now at 30%, also if happens slow and mild
]
Leanne: Into the us, Unemployment has gone up to a level that is typically an indicator for recession, but there's many, many indicators of recession and actually the probability of recession or us falling into recession has dropped. And so now we're seeing an increased probability of a soft landing up until about 70% and recession risk has dropped to around 30%. So, it's only one of the indicators that we're looking at, but when you take a little bit of a deeper look at the employment data in the US, you will notice that what we're also seeing is an increase in the quantity of people that are part of the employment, I guess the labour market. And so, then when you have a higher quantity of people, you're basically increasing one of the factors of that calculation, the denominator. And so that's a misnomer almost that you're seeing that increased unemployment rate because it may not have changed the reality for people, it's just that we're seeing an influx of people into the labour market.
Interest Rates
- Continued rate cuts
- Still high rates
- Remains economically painful
- US Federal Reserve:
- Sept 18th cut their rates for the 1st time by 0.50%
- Rates will likely continue lower, perhaps making their way down to 3% or below.
- Likely to move slowly
]
Leanne: So, interest rates, we are anticipating continued cuts. We are continuing to see cuts and the US Federal Reserve this month, or actually last month, September 18th, cut their rate for the very first time. Now lots of the other central banks have been cutting and so the Federal Reserve came out with a 0.5% decrease. And that's significant because normally central banks are doing 0.25, they were a little bit late to the game. And so them cutting their rates by this level is not a huge surprise and we do anticipate that they'll continue this downward trend of their rates. Rates are likely making their way down or making their way back down to around 3% or even below if we need some economic stimulus. Now we're likely going to see the rates decrease in a slow and orderly manner comparatively to when we're in a real recession or something whereby we need to be stimulated out of it. So, we're not in that scenario. So, we're not anticipating that we're going to see very quick cuts, but we are headed back down and we are headed back down because the rates remain really high and it is economically painful if they remain at this level. So it is a good thing that we're seeing rates drop however much we don't like to see rates drop as GIC investors.
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Equities., graph shows the daily movement of the Canadian and US markets from September 2021 to August 15, 2024
Graph: Daily Equity Chart
Source: Bloomberg as of October 7, 2024
]
Leanne: And so here's a picture of our equities over the month and actually over the last little bit here. So this is a daily chart of the movement of both Canada in the red there and in the blue is the American market. So you can see what has happened over this last little bit here and it's really, really trailed upwards. And so this is showing a lot of volatility, but it's heading in the right direction and markets are anticipated to continue in this direction.
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Equities., graph shows the daily movement of the Canadian and US markets from November 2019 to August, 2024
Graph: Monthly Equity Chart
Source: Bloomberg as of October 7, 2024
]
Leanne: And if you look at a longer chart, you can see how the little blip over in 2020 looks now once we see a longer period of time of a chart, but you can see the big runup that we've seen over the last little bit. And in particular you can see that the markets have gone past their highest point as well.
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Fixed Income and Credit Markets
- Still offering investors a potential cushion during downturns – key part of portfolios
- As rates have dropped, so have bond yields.
- Potentially yields have dropped sufficiently?
]
Leanne: Okay, so fixed income and credit markets because fixed income markets are forward-looking and bonds and instruments in the fixed income market are always pricing in what they anticipate because we're anticipating our rates to be dropping, they've already priced in a lot of that drop. And so, bonds and fixed income are still really good to hold in a portfolio because they offer that safety net or that a little bit more of a secure element. And so, they can fund things like your lifestyle during retirement or if you have a purchase coming up or what have you. This can be really a good source and a diversifier for your portfolio. And as rates have dropped, so have the bond yields. And so as bond yields have dropped, the pricing of the bonds have elevated a bit. Now the question is potentially have yields dropped sufficiently that we might not see any further drops and that our capital gains scenario might be done within the fixed income market.
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Inflation
- Pressures continue to ease
- Inflation looking increasingly normal and expected to remain at these lower levels
- Oil, shipping costs, business prices and other drivers
- Moving in the right direction
- Canada – now sitting around 2%
]
Leanne: And so there's a possibility there that we're watching. Alright, so inflation pressures continue to ease off of inflation and pretty much Canada now we're sitting around 2%. And so that's very close to where the Bank of Canada targets inflation to be. So inflation has really come down quite nicely and it's looking increasingly normal and we are anticipating it to remain at these levels, which is nice because inflation at a very high level is hard to handle as not only consumers but the economy in itself and business owners, we've seen oil shipping costs, business prices, and some other drivers all moving in the right direction.
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Other Considerations
- Federal Businesses (Incorporated under the Canada Business Corporation Act – CBCA)
- As of Jan 2024, required to file information on individuals with significant control (ISC)
- Public Online Registry Exists
- CRA Collection of taxation
- Tax treaty allows them to request the IRS to collect for them.
Sources: CRA Website (Canada Revenue Agency)
https://www.canada.ca/en/revenue-agency.html
]
Leanne: And so, then that's kind of been a nice little inflation story for us here onto some other considerations. Now, I didn't say tax considerations this time because I wanted to point out that federal businesses now, as of January, 2024, they were required to file information on the individuals who own them. And this is a new disclosure and its individuals with significant control. And so if that is business that you own that's federally licensed or incorporated, then you might have this. Now it's a public online registry that exists so that people can go in and search the company and find out any of the individuals with significant control. There is suspicion that it's going to extend and expand out to the provinces. Now one thing to know is that you aren't able to actually search by the individual to find out all the companies that they own. You actually have to search by the company itself. And so here at the bottom, here are some of the sources as to where this information was found, but we are thinking that it is eventually going to be something that's going to be available for people to search. Just so you know. So, there's a question on privacy, but the directory and the thought process of people being able to see through who the owners are at the end of the company is valuable. Now, one of the thing that came up was CRA's ability to collect taxes. Now the US and Canada have a tax treaty. And the tax treaty, if an individual, like let's say a Canadian moves to the us, they are still required to pay all of their taxes here in Canada. And if there is a deficiency, the CRA can ask the IRS to go in and directly collect it. And there's no court proceedings or anything like that that the person would have in the US because it's a tax treaty. And so, then the IRS is obligated to go in and collect it. So, something to be aware of that you can't get away from your taxes regardless of where you move.
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Monthly Debrief
October 2024]
Leanne: Alright, so that brings us to the end of what I thought was important to share with you in our monthly debrief and I hope to see you again next month. Take care.
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Disclaimer
This information, including any opinion, is based on various sources believed to be reliable, but its accuracy cannot be guaranteed and is subject to change. CIBC and CIBC World Markets Inc., their affiliates, directors, officers and employees may buy, sell, or hold a position in securities of a company mentioned herein, its affiliates or subsidiaries, and may also perform financial advisory services, investment banking or other services for, or have lending or other credit relationships with the same. CIBC World Markets Inc. and its representatives will receive sales commissions and/or a spread between bid and ask prices if you purchase, sell or hold the securities referred to above. © CIBC World Markets Inc. 2024.
Leanne Mamchur is a Senior Portfolio Manager with CIBC Wood Gundy in Calgary. The views of all commentators and/or guest speaker(s), and Leanne Mamchur do not necessarily reflect those of CIBC World Markets Inc.
“CIBC Private Wealth” consists of services provided by CIBC and certain of its subsidiaries through CIBC Private Banking; CIBC Private Investment Counsel, a division of CIBC Asset Management Inc. (“CAM”); CIBC Trust Corporation; and CIBC Wood Gundy, a division of CIBC World Markets Inc. (“WMI”). CIBC Private Banking provides solutions from CIBC Investor Services Inc. (“ISI”), CAM and credit products. CIBC Private Wealth services are available to qualified individuals. Insurance services are only available through CIBC Wood Gundy Financial Services Inc. In Quebec, insurance services are only available through CIBC Wood Gundy Financial Services (Quebec) Inc. The CIBC logo and “CIBC Private Wealth” are trademarks of CIBC, used under license. “Wood Gundy” is a registered trademark of CIBC World Markets Inc.
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Introduction to Corporate Philanthropy
Introductory to a 3-part series that provides an overview of the tax benefits of charitable giving. Email leanne.mamchur@cibc.com for the full series.
[On screen: CIBC PRIVATE WEALTH
Corporate Philanthropy
Strategically Giving Back
from the desk of
Leanne M. Mamchur, CFA, CFP, FMA ]
[On screen: Leanne M. Mamchur presents with a warm and engaging demeanor. She has shoulder-length dark hair with glasses and is dressed in professional attire, suggesting a businesslike and approachable manner. ]
LEANNE M. MAMCHUR: Hi. Today we get to talk about one of my near and dear topics, which is philanthropy. I know I say that word not quite right, but giving back. Basically, strategically giving back. To stretch your dollars longer and further than you could otherwise do. There's strategy behind it. First off, I think that anybody's listening to this is already doing great because they're thinking about corporate philanthropy and philanthropy in general. I think that we can all give so much back to each other and society and those less fortunate.
I feel as though that's a very good start in the right direction. I wrote an article related to this, and it's called Corporate Philanthropy, Strategically Giving Back. The reason why I wanted to write the article was to give people the concept or idea of trying to expand what they're already intending to do through creative ideas. With Canadian law or the Canadian revenue agency, there's some incentives already built in, especially for corporations, if they were to consider to do charitable donations. Let's dive in.
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Giving Back to the Community
• • Important objective
• • Both time and money
• • Benefits to humanity
• • Improves donor's quality of life ]
LEANNE: Giving back to the community. This is just the intro video, but basically, it's such an important objective for so many people and so many private clients that I work with. It just fills the bucket of joy within their heart. They give both, it's not just money side, they also are so generous on giving their time and as well as their money. Then they are part of the boards, they're part of fundraising campaigns. They're part of events, they're coordinating events. They're doing all sorts of wonderful things for the community, and I very much applaud them.
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Improves Donor's Quality of Life1
• • Greater contentment, joy and community
• • Conversation around gifting – enhance family bond ]
LEANNE: They're also sharing. They're sharing their hard-earned money with ventures and charities that are important to them. It's a huge benefit to humanity in having that ability, but it also very much improves the donor's quality of life. It's interesting because there's an article written about how much it improves the donor's quality of life. They get joy from the act of giving. Sometimes somebody might give you a present for your birthday, and you feel bad about it, but you have to just remember that they are getting joy from the ability to gift you something.
That goes the same way for charity and so greater contentment, joy and they also have a sense of community. You can't underplay, especially over these last two years. I'm recording this in 2022, but the last two years of isolation and COVID, and all the trauma that that has caused, the sense of community is very important. To get that back is huge. The other thing I guess would be the improvement of a donor's quality of life in the way that it changes a family and it changes a family dynamic if you want it to.
Some people really like to be anonymous in their donations and don't share anything with the family, but other people really want it to be a lasting legacy. Then they create that ability so that kids can be part of the conversation or nieces or nephews or whomever in the family, and then it creates these family values that just don't exist without this type of structure and strategy. I shouldn't say that they don't exist because they probably, they might in the background, but it just enhances them, I guess, more than anything.
[Text on screen: CIBC PRIVATE WEALTH
World's Major Philanthropists
• • Bill and Melinda Gates
• • Warren Buffett
• • Oprah Winfrey
• • Michael Jordan
• • Serena Williams
• • J.K. Rowling (Harry Potter)
• • Jeff Bezos (former CEO of Amazon) ]
LEANNE: You get an enhancement of family values through this process. Some of the world's most famous philanthropists are listed here on the screen. I'm sure you recognize lots of these names. One of the things that I was noticing when I was researching this, was where are all the Canadians in that list? I know that. I know certain families, and on the private client side that are incredibly generous with their funds and their time. I encountered an article written by Dene Moore, and I know that it's not Demi Moore from Ghost, which is one of my favorite movies.
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Where are the Canadians?
Article written by Dene Moore for Canadian Family Offices2
• • Quiet way
• • Request for anonymous donation
• • Tend to make donations over time
• • I.e.: Rogers Family Foundation, Weston Family Foundation, etc. ]
LEANNE: Anyways, so Dene Moore for the Canadian Family Offices, or wrote an article for the Canadian Family Offices. It outlines how Canadians are just a little bit more anonymous in their donations, and you get just as much pleasure for being anonymous to being loud. We're more doing our donations in a quiet way. Sometimes when we're doing a donation to a certain charity, people request anonymous donations and so they don't want their family foundation named. They don't want themselves named. You have that ability to stay anonymous but still be giving back.
Other people want to use their donation as a representation of what they would like other people to do in the corporate side. By not being anonymous, sometimes they're trying to encourage others to follow suit. I myself have set up a family foundation, and my husband and I, and I feel as though that it's a really great thing to share because I think that more people could do that type of thing. I'm less on the quiet side, I suppose, even though that I am full-fledged Canadian from Saskatchewan.
Then I feel as though that there's all sorts of different ways of doing it but good examples are Rogers Family Foundation, the Weston Family Foundation here in Canada. Canadians are extremely generous with both their time and their money. The majority of private clients get to a stage, and especially if they're very, very successful. They typically get to a stage where they're almost compelled or called to give back.
[Text on screen: CIBC PRIVATE WEALTH
Corporate Philanthropy
Short Three-Part Series
• • Tax Benefits of Corporate Charitable Giving
• • Strategically creating a Family Foundation
• • Advantages of using Life Insurance Policies ]
LEANNE: It's almost like an inner drive that they have through their success that they want to share, which is lovely. It's beautiful. With corporate philanthropy, I broke this topic into three separate series, so that if you wanted to just watch one or you just have limited time, you could just click play and just hear about one specific topic. I wanted to break it down just a tad, but these are the three parts that I'll be talking about in the next three videos.
It's the tax benefit of corporate charitable giving, the strategy of creating a family foundation or the consideration of doing that, and the advantage of using life insurance policies in a corporate sense to again, enhance what you are able to give. With that, I'm going to turn to notes and references and then followed by a disclaimer slide. I hope that you'll join me in the next three series as I go through and delve into the topic a little bit more. Thank you.
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Notes and References:
Notes:
1 - https://link.springer.com/article/10.1007/s10902-020-00242-8,
Lawton, R.N., Gramatki, I., Watt, W. et al. Does Volunteering Make Us Happier, or Are Happier People More Likely to Volunteer? Addressing the Problem of Reverse Causality When Estimating the Wellbeing Impacts of Volunteering. J Happiness Stud 22, 599–624
(2021). https://doi.org/10.1007/s10902-020-00242-8
2 - https://canadianfamilyoffices.com/philanthropy/biggest-canadian-philanthropists-give-in-a-more-quiet-way
Biggest Canadian philanthropists 'give in a more quiet way'
Author of the article: Dene Moore • Canadian Family Offices
Publishing date: Aug 05, 2021 ]
[Text on screen: CIBC PRIVATE WEALTH
Disclaimer:
CIBC Private Wealth Management consists of services provided by CIBC and certain of its subsidiaries, including CIBC Wood Gundy, a division of CIBC World Markets Inc. Insurance services are available through CIBC Wood Gundy Financial Services (Quebec) Inc. In Quebec, insurance services are available through CIBC Wood Gundy Financial Services (Quebec) Inc.
“CIBC Private Wealth Management" is a registered trademark of CIBC, used under license. "Wood Gundy" is a registered trademark of CIBC World Markets Inc.
Clients are advised to seek advice regarding their particular circumstances from their personal tax and legal advisors.
The views of Leanne Mamchur do not necessarily reflect those of CIBC World Markets Inc. The information, including any opinion, is based on various sources believed to be reliable, but its accuracy cannot be guaranteed and is subject to change.
"CIBC Private Wealth Management" consists of services provided by CIBC and certain of its subsidiaries, through CIBC Private Banking; CIBC Private Investment Counsel, a division of CIBC Asset Management Inc. ("CAM"); CIBC Trust Corporation; and CIBC Wood Gundy, a division of CIBC World Markets Inc. ("WMI"). CIBC Private Banking provides solutions from CIBC Investor Services Inc. ("ISI"), CAM and credit products. CIBC Private Wealth Management services are available to qualified individuals.
If you are currently a CIBC Wood Gundy client, please contact your Investment Advisor. ]