June 2023 Newsletter

Money is a tool. It's something that supports your life!

Planning Tip:

Delaying CPP benefits is the safest and cheapest annuity money can buy - yet 99% of Canadians are not taking full advantage of the option to increase their CPP benefits! 

Choosing to delay Canada Pension benefits (CPP) from age 65 to 70 would result in a 49.2% increase in the annual real (inflation adjusted) benefit payout value, while taking CPP at age 60 would reduce benefits by 39.1%.

An average Canadian woman retiring in 2020 with maximum CPP benefit can expect to lose $155,000 in lifetime income by taking CPP at age 60 in 2020 rather than 70 in 2030.

 

Before you consider taking your CPP benefits, give us a call and see if delaying your CPP makes sense for you!

Our Portfolio

We hope you've been enjoying our podcasts - Stay tune for a new Financial 15 episode this month!

May was a difficult month for most stocks in the markets. Only seven stocks have been responsible for almost all of the upside in the S&P 500 index this year.

Only one trade was conducted in the accounts. Selling the Junior Gold EFT and moving the proceeds into the High Interest Savings Account.

Returns in our 60/40, 70/30 and 80/20 portfolios before fees:

Interesting Charts

As we can see in this little chart, the stocks taking up the smallest part of the S&P right now are generating the bulk of returns. Tech continues to soar in this new age of internet shopping, gaming, AI, social media and more.

Technical Comment

https://www.brookstradingcourse.com/price-action-trading-blog/

 

• The May S&P 500 was an outside bull doji closing in the upper half of its range.
• Last month, we said that traders will see if the bulls can create another follow-through bull bar, or will the S&P 500 trade higher but close with a bear body or a long tail above.
• If May is a big bull bar closing near its high, it could potentially flip the market to Always In Long.
• The bulls managed to create consecutive bull bars closing above the 20 month exponential moving average.
• Looking back, whenever this has happened (consecutive bulls bars closing above the 20 month exponential moving average), it has often led to at least slightly higher prices.
• The bulls want another strong leg up from a double bottom bull flag (Dec 22 and Mar 13), completing the wedge pattern with the first 2 legs being December 13 and February 2 highs. The third leg up is currently underway. The next target for the bulls is the August 2022 high.
• The bears see the move down from January 2022 as a broad bear channel, with the August 2022 high as the last major lower high.
• The problem with the bear's case is that they have not been able to create sustained follow-through selling since September 2022.
• However, because the move up since March is in a tight bull channel, odds slightly favor the market to be in the sideways to up phase in the first part of June.
• If June is a big bull bar closing near its high and above August's high, it will increase the odds of a retest near the all-time high.

Big Picture

Just because the recession isn't here yet, doesn't mean it's not coming!

When stocks fell sharply in 2022 they didn't fall for the same reasons they had in the past bear markets - falling EPS estimates P/E's and rising unemployment claims. Instead, it was the perfect storm of an equity bubble combined an unexpected rising of interest rates and inflation not seen in decades. Essentially, last year was a valuation reset due to the end of low rates and low inflation.

We expect the greatest downside for equities in the back after the year as the employment backdrop deteriorates sharply. Historically, the pivot rally ends when initial unemployment claims begin to rise and the Fed cuts rates in response to the weakening employment. Rising rates have a lag effect and coupled with the huge increase in Covid related savings, this lag has lasted longer than most expected. 

Lower earnings are coming. As Nancy Iazar at Piper Sandler says, "business confidence is consistent with a -12% y/yr drop in the S&P 500 earnings in 2023, tighter bank lending standards are also consistent with the EPS declining 40% this year, and a drop in the ISM - pointing to earning declining -5% here in 2023 and another 15% in early 2024. As margin squeeze looms as very high unit labor costs run into slowing top line growth. Companies will race to shed head count buttressing earnings, but lifting unemployment and cooling wage growth."

The three major precursors to a hard landing (inflationary problems, rapid Fed hikes and tight bank lending standards) are all in place right now. We have seen housing peak in November 2020, orders peak in March 2021, profits peaked in 2021 and unemployment bottomed in September 2022. 

Keep in mind that recessions are NEVER priced into the markets until unemployment claims start to rise sharply. We saw a big squeeze in '99, '07 and early 2000 before the big picture kicked in.

Ultra low rate have caused a massive bubble, bigger than the tech bubble of 2000, gold in the 70's, and housing in '07. Like all of those bubbles, this bubble - at some point - will pop. 

 

Is it really different this time?

 

The answer: Cyclical Bubbles follow the same pattern. We've seen it plenty of time before, and we will continue to see them throughout our lifetime. We can only speculate and prepare as best we can to protect our clients, giving peace of mind during tumultuous times.

Millennial Minute

Here we are again, having to deal with the current tightening on our wallets as our dollars stretch less and less with every Bank of Canada announcement. Many new homeowners in my age range are feeling the pressure as their variable rate mortgages are making their payments tougher every month - while the other chunk of Millennial homeowners are dreading the next mortgage resigning date. 

I'm here with another article revolving around budgeting through this intense round of inflation and high interest rates. Now more than ever, we need to make our dollars stretch further and further, and I give 10 tips that could help you or those you know who are struggling during these hard times. 

 

Click here to read up on my 10 Budgeting Tips for Millennial's in Today's Market

 

Protecting Your Wealth

You have worked hard to build your family's wealth; that is why protecting it is a key priority to ensure you are prepared to meet your current and future wealth management goals and commitments. 

This article discusses several considerations that can help to safeguard and enhance your wealth.

 

Click here to read all about Protecting Your Wealth