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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.
We also attached, in pdf format, an article on railroad mergers, giving you an interesting analysis of the transportation industry.
Under the Wealth Management section, we feature a few articles on tax refund planning and insurance considerations for individuals as well as businesses.
We encourage all of those that have not yet completed all their 2019 contributions to their registered plans to proceed as soon as funds are available. (RRSP, RESP, TFSA).
Please do not hesitate to reach out to us should you have any questions.
Stock Research of Interest
Analyst: Stéphane Rochon, CFA, Equity Strategist
Introducing Our Recession Probability Model
This month, we officially launch our proprietary BMO Recession Probability Model. Far from an academic exercise, we believe it is critical to get an advanced warning of major economic slowdowns from a risk management perspective, since history has shown that virtually every bear market (i.e. 20%+ pullback) over the last 50 years has preceded a recession.
The good news is that our model still shows a lower than 30% probability of a U.S. recession in the next year, which is relatively low by historical standards, and one of the principal reasons we were convinced the severe correction we experienced at the end of 2018 was an overreaction. Clearly, the market also came to that conclusion year-to-date, given the v-shaped rebound we have experienced.
BMO Capital Markets
Analyst: Fadi Chamoun, CFA
Rail Mergers: On the Horizon, But Not Quite There Yet
Bottom line: We believe that mergers between the Class 1 railroads could deliver meaningful cost and revenue synergies while dramatically improving service levels. We don’t expect the railroads to contemplate mergers now given the stable regulatory environment and the opportunity for productivity gains they currently enjoy, but we do believe that the rising competitive intensity from trucking could be a catalyst for the industry to consolidate over the medium to longer term. Any change in the regulatory climate could also act as a catalyst.
We believe that a strong case exists for U.S. west/east mergers. Once rail mergers get under way, we believe the industry could contemplate further consolidation, possibly moving toward a duopoly in the next 15 years.
Based on our analysis, we would expect the railroads to contemplate west/east or transcontinental mergers, but only when their circumstances change significantly. This could occur if the regulatory environment changes or if the competitive threat from trucking becomes too intense.
We would not expect the railroads to consider mergers lightly because of the regulatory certainty they currently enjoy. In addition, any merger would be complex, entailing a detailed calculation by the railroads as to the perceived benefits, what they might be forced to give up by the U.S. Surface Transportation Board (STB), and whether all that would be offset by merger benefits.
If mergers do take place, we would expect more than one because any remaining eastern railroad would likely be left at a competitive disadvantage.
Read more (please contact us)
The RRSP contribution limit for 2019 is $26,500. You can find your eligible amount on your federal
notice of assessment which you should have received by now.
TFSA contribution amount for 2019 is $6,000 or cumulative of $63,500 for 2019 if you have never contributed to a TFSA account.
Financial & Estate Planning
Planning for Your Income Tax Refund
For many Canadians spring signals the arrival of their income tax refund from the Canada Revenue Agency (the “CRA”) or Revenu Québec (“RQ”), if you also file your taxes in Quebec. If you’re receiving a tax refund based on your 2018 income tax return, it may be worthwhile meeting with your BMO financial professional to discuss how you can maximize using these funds, such as repaying non-deductible debt, or catching up on your Registered Retirement Savings Plan (“RRSP”), Tax-Free Savings Account (“TFSA”), or Registered Education Savings Plan (“RESP”) contributions.
Insurance Considerations for Individuals
Unforeseen events, such as illness, disability or death, can have a devastating impact on a family and their financial future. Insurance is an important part of a comprehensive wealth management plan, and helps provide financial protection against the unexpected. This article discusses several types of insurance coverage available to help individuals safeguard themselves, their family and their wealth.
Insurance Considerations for Business Owners and Incorporated Professionals
Insurance is generally thought of as a risk management tool; however, for a business owner or incorporated professional, insurance can provide multiple benefits, including the potential for significant tax savings. This article looks at three insurance strategies that can be implemented into a wealth management plan to supplement retirement savings, protect a business, and help maximize the value of an estate.
Tim, Catherine, and Edward