Market Update & Charitable Giving Tax Guide
With the federal election running its course and creating a new landscape for at least the next few years of government, October has been a busy month for Canada in general.
As we approach the holiday season we wanted to bring you a brief market update as well as an overview on Charitable Contributions. The holiday season is often a generous one and we want to ensure our clients understand the added tax benefits of giving.
How are the markets doing right now?
Since mid-summer we’ve seen a largely flat market here in Canada for most Canadian investors. This may come as a surprise to many who watch account values on a regular basis since it’s felt considerably more like a roller-coaster ride. When we say “flat”, we certainly don’t mean “boring”. The average balanced investor, for example, has seen swings of 2-4% both up and down within a single month – continuing the ongoing theme of volatility. Many portfolio managers are, as a result, continuing to shock-proof portfolios by focusing on high quality equities, stable investment grade fixed income securities and diversifying as much as possible both in and outside our borders.
At the end of the day there are a number of perspectives on the outlook created by the election results. Most analysis tends to focus on a few major talking points:
Trans Mountain (TMX) and Tidewater Access for Oil:
Opinions remain divided on how a Liberal minority government will impact the prairie provinces desire to get their oil products increased access to world markets and refinery capacity on the coasts. While some say that minority governments tend to foster increased cooperation (you help us with our policy, we’ll help you with yours), others still are pointing out how more anti-pipeline parties can form a powerful block that will help push policy away from that direction.
Western provinces definitely sent a strong message with their support of the decidedly pro-energy Conservative party – Alberta elected only a single non-Conservative MP and Saskatchewan Conservatives had a clean sweep of all ridings; Many attribute these results to Western alienation due to lackluster support for the key industry supporting those provincial economies.
The general consensus is that should the government actually make progress with tidewater access, the whole of Canada will benefit but at the expense of substantial political capital in areas such as the West Coast and Quebec (areas that have been vocally anti-pipeline).
Housing Market Concerns:
Each party had platforms designed to help continue to buoy an increasingly expensive Canadian housing market, many of which were specifically targeted at first-time buyers in high priced markets such as Vancouver and Toronto. These platforms varied from purchase incentives to a full-blown removal of the mortgage stress test introduced last year.
By and large, these platforms were all major points of concern for the Bank of Canada, who has repeatedly pointed at the increasing debt load of Canadians (of which housing is the largest component) as a substantial threat to the Canadian economy.
The new minority government will have to tread a fine line between increasing housing supply & access and practicing sound fiscal policy that doesn’t over-expose the Canadian economy to either a housing bubble or an over-leveraged population that could see mass bankruptcies in the face of increasing interest rates.
Balanced Budgets:
The Liberal government has come back into session with a declaration that their primary focus at present is prudent fiscal policy. This runs counter to a swelling budget deficit of nearly $27.4 billion if they manage to fund all of their campaign promises – a concern to many commentators.
Despite this, the general consensus appears that the market has (at least in the short term) largely priced in the impact of a minority government, although strains on fiscal and monetary policy of such high debt loads for the government will have long-term and far reaching consequences that are difficult to predict.
Regardless of how you voted in this election, the average term of a minority government in Canada is 24-36 months of tentative rule before either they either face a challenge to their power (a vote of no confidence) or seek to capitalize on positive momentum by calling an early election. While Canada still remains a land of relative wealth, health and stability, most people simply want to know their voice is heard in parliament and that their concerns are addressed. We remain optimistic that, in the long term, Canada will remain a fantastic place to call home.
