Portfolio Managers' Notes


August 2023




Enclosed in this Portfolio Managers’ Notes, we present BMO Nesbitt Burns’ latest portfolio strategy report to give you an update on equity markets and our strategist’s perspective. In addition, we have included the second quarter earnings report on PrairieSky Royalty, a Model Portfolio holding.


Under the Wealth Management section, we have included an article on the tax advantage of discount bonds, a fixed income strategy that we have been utilizing in taxable accounts where appropriate. We have also included an article that details the safeguards that are in place at BMO Nesbitt Burns to protect your assets. Finally, we remind you of the dates and limits for RRSP, TFSA, and RESP contributions. We would also remind our clients, in the March budget for Quebec, as of January 1, 2024, the Quebec Government will increase the maximum age at which an individual can apply for Quebec Pension Plan (QPP) benefits from age 70 to 72. 


Coming Soon

The tax-free First Home Savings Account (“FHSA”) is a new registered plan which enables prospective first-time home buyers (18 and over) to contribute $8,000 annually up to a total of $40,000 toward saving for their first home on a tax-free basis. Like a Registered Retirement Savings Plan (“RRSP”), contributions to an FHSA are tax-deductible, and withdrawals to purchase a first home – including from investment income – are non-taxable, like a Tax-Free Savings Account (“TFSA”). Sign up here to get notified when it’s available.


We would like to wish all of you a wonderful end of summer and remind you that we are here to help if you have any questions or would like to review your investment portfolio or your financial plan.


Market Research
Market Insights
Equity and Fixed Income Strategy:
Analysts: Stéphane Rochon, CFA, Equity Strategist and Richard Belley, CFA, Fixed Income Strategist.
Interest Rate Stability at Last

The Bank of Canada and Federal Reserve were at it again, raising rates another quarter point recently. While we think those latest increases were unnecessary given already sharply lower inflation trends, at least we now have a good chance they are on indefinite pause, meaning no more hikes. Our excellent BMO Economics Team puts it best: "it's our forecast that the tug-of-war between the economic headwinds and tailwinds during the coming months will tilt to the former, causing enough growth deceleration and disinflation to turn a September skip into a more prolonged pause. In other words, welcome to terminal territory." Everything is possible of course and their ultimate decision will be "data dependent" - as they are wont to say - but having visibility on rates has to be seen as a positive for the bond and stock markets. History has shown that stocks tend to have their best returns when interest rates are stable. Going back to the early 1980s, the S&P 500 and the S&P/TSX have enjoyed strong double-digit median returns when rates were flat(tish), independent of their absolute levels.
Read More

PrairieSky Royalty: PSK-TSX
Q2/23 Cash Flow In Line; Record Oil Volumes

Bottom Line:

Cash flow was broadly in line while better-than-expected oil royalty production was offset by weaker gas and NGL volumes relating to wildfire activity and prior period adjustments. We continue to like PrairieSky for its outsized heavy oil growth potential moving forward, anchored by exposure to the Clearwater and Mannville multilateral plays. We forecast net debt to be $186 million by year-end (0.5x 2023E D/CF, BMO Deck), with a strong likelihood of a modest dividend bump in early 2024. We maintain our Outperform rating and $30 target.
Read More (please contact us)

Wealth Management

The After-Tax Advantage of Discount Bonds 

With the highest interest rates seen in over a decade, GICs have become extremely popular among yield-focused investors looking for limited – to no – portfolio volatility. However, bond yields have also increased significantly, leading to many securities now being offered at deeply discounted values to their maturity value (i.e., $100)*. As a result, the fixed income market may actually offer a more attractive investment opportunity than GICs for investors from a tax perspective.
Read More

*Yields and bond prices are inversely related. So, a rise in a bond price will decrease the yield; and a fall in the bond price will increase the yield.

Your Assets are Safeguarded at BMO Nesbitt Burns Inc. 

As a client of BMO Nesbitt Burns Inc., your dedicated BMO Nesbitt Burns Investment Advisor takes pride in helping you manage your wealth and reaching your financial goals. You trust us with your most confidential information, as well as safeguarding the wealth that you’ve worked hard to build. We take this responsibility seriously and have protections in place to safeguard your assets. Beyond our internal controls, BMO Nesbitt Burns is a member of the governing bodies of our industry and, as such, operates its business in strict adherence to the regulations, policies and bylaws dictated by these governing organizations.
Read More


Contribution Reminder
For Your RRSP, TFSA and RESP Accounts

Maximizing the value of your registered plans by making annual contributions to your Registered Retirement Savings Plan (“RRSP”), Tax-Free Savings Account (“TFSA”), and Registered Education Savings Plan (“RESP”) is an important wealth planning strategy. By making your annual contribution(s) early in the year, you’ll benefit from the tax-sheltered growth all year long.


RRSP contribution amount for 2023 is the lesser of $30,780 or 18% of your 2022 earned income.


TFSA contribution amount for 2023 is $6,500 or cumulative of $88,000 for 2023 if you have never contributed to a TFSA account.

The RESP is an excellent way to save for post secondary education for your children. A contribution of $2,500 to the RESP leads to a combined 30% in government matching savings grants.


Tim, Catherine, and Edward