As we wrap up 2023, we wanted to take a moment to share how fortunate we all are. Our holiday newsletter isn't just about finances, hopefully it helps guide you through the nuances of the season!

Our newsletter will focus on the following topics:

Recent Market Noise
Holiday Party (Beacon Wealth Partner Group Picture)
Homes, Mortgages, and Interest Rates
Tax Time
New Energy Transition
Holiday Recipe and Cocktails

Recent Market Noise

A large amount of investment money is run by what are known as Quantitative Analysts (Quants) who create complex mathematical models to manage investments using inputs such as interest rates. So, they try and peer into the near future to form an opinion on these inputs.

But they don’t seem to be very good listeners. From our standpoint, central banks have been reasonably clear on their outlook that interest rates will not begin to drop until the second half of next year. Like many people, Quants want to be the ones that say “I told you so”. And to us it appears that one day they assume rates will start to fall early next year and the next day believe that they will never fall. Add in other factors such as wages and they generate a lot of intra-day noise and market volatility. A short term focus blinds them to longer term truths.

North American stock markets were weak from August through October. But November was very strong for both the Canadian and US markets. At the time of writing, December markets have also risen, though not to the same extent as November.

Concerns about a deep recession caused by interest rates being increased too quickly seem to be decreasing.

Well run companies whose products or services that are in demand will, over time, grow their sales and thus the value of their shares. Some companies are even able to thrive during recessions. Investors who understand this point are patient and ignore the noise.

The internet allows data to be shared easily, the power of modern computers allows us to search through that data to find companies that are doing well.

Holiday Parties

Recently we were able to get away from the office and attend a holiday party with some colleagues. Hawaiian themed…..if you couldn’t tell.

Homes, Mortgages, and Interest Rates

In November, Canadian home prices experienced their most significant decline in over a year, dropping by 1.1% month-on-month, marking the third consecutive monthly decrease, as per data from the Canadian Real Estate Association.

The average price now stands at $735,500, a level similar to that in May. This decline is attributed to the impact of persistently high borrowing costs, deterring potential buyers. The Bank of Canada did maintain its benchmark rate at 5%, however hinted at potential future rate hikes, keeping pressure on owners facing higher mortgage payments (Canada Home Prices).

Sellers, initially more active earlier in the year, are now adopting a cautious approach, anticipating a potentially more active spring market next year with expected interest rate cuts.

The larger challenge for the housing market will begin next year as an estimated 74% of fixed rate mortgages (Fixed Rates) in Canada still haven’t renewed the rates at higher levels. How would that impact payments, let’s look at a case:

Adam and Jane own a home with a $1,000,000 mortgage set to be paid off in 25 years. The mortgage had a 5-year term at 2.5% that they took out in June 2019. Monthly payments were $4,486.16
At the end of the 5-year term it is estimated they will owe approximately $846,000.00.
New 5-year rates are estimated around 5.75%, which would make the payment in June 2024 $5,939.62.
This difference results in Adam and Jane having to pay an extra $17,500 each year to pay off the mortgage
For many Canadians this isn’t an achievable task. Individuals are going to be forced to either sell the property or will have to extend the mortgage to help lower the payments.
Adam and Jane next year would have 20 years left on the mortgage, however if they extended the loan to be paid off later here is how the payments would change:
- 25 year: $5,322.24
- 30 year: $4,937.03

Time will tell if the Government of Canada reduces rates faster to help alleviate some of the higher costs mortgage holders will face.

Tax Time

With another year almost in the books, we wanted to remind everyone of some important upcoming tax deadlines.

If you own a non-registered account (also known as cash account), please wait to file your taxes closer to the deadline in mid-late April. The deadline for companies to provide iA Private Wealth tax information about your investments is March 31st. By the time we are able to process the information, it may be a week or two before you receive it.

Other year end important details:

You have until December 31st to make charitable contributions which can be claimed against this year’s income. The same deadline applies for RESP contributions to maximize the grant for 2023.
Withdrawals from a TFSA can be reinvested back the following year, without requiring new contribution room.
TFSA contribution room will rise to $7,000 in 2024
Tax loss selling must be made by December 27th so that the trade settles before year end.

The RRSP deadline is on February 29th (yes that is correct – leap year!). Should you have any questions about how this could impact your taxable income please let us know.

New Energy Transition

While central banks are trying to slow inflation, governments are pushing the transition to cleaner sources of energy. While the intention of getting society moving in this direction is good, policies may need to be adjusted overtime. As an example, a recent article in Business in Vancouver (Nov 27- Dec 3) highlighted the BC government’s policy on electric vehicles. In 2025 and 2026, Electric Vehicles (EVs) and Hybrids are to make up 10% and 26% respectively of new car sales. In 2030 it is to be 90% and 100% in 2035 (EV Goals).

But will manufacturers be able to meet these targets for a small market like BC? Getting the resources to massively produce EVs will be difficult. First Quantum Minerals is being forced to close it’s large copper mine in Panama and getting new mines approved is a long and complicated process. After two decades of modest mineral prices, there are few mines coming on stream with the metals needed for the conversion to a new energy world.

Recently we also learned that the high-tension power lines were designed to provide a high amount of electricity during the day but a lower amount at night. This allows the cables to cool and maintain their strength. But if everyone is charging their vehicles at night, at some point the cables will begin to fail.

Builders are already being limited to how many super chargers than can install in new developments - residential grids are not set up like industrial areas. The transition away from petroleum to electricity for heating homes may make the issue worse.

Holiday Recipe and Cocktails

As always, we wanted to share some recipes and cocktails we have tried, that we thought you may like. We added 2 holiday cocktails and a Ratatouille Pie!

Check out our recipe page here: Recipes

We hope you can share time and laughter with friends and family over the holidays. As always, please reach out if you have any questions.

Jack Fournier B.Sc, FMA, CIM®
Portfolio Manager | iA Private Wealth
Insurance Advisor | iA Private Wealth Insurance Agency
700-609 Granville St. Vancouver, BC
p: 604 895 3348
jack@beaconwealthpartners.ca

Travis Kidson, B.Sc, CFP®, CIM®
Portfolio Manager | iA Private Wealth
Insurance Advisor | iA Private Wealth Insurance Agency
700-609 Granville St. Vancouver, BC
p: 604 895 3486
travis@beaconwealthpartners.ca

This information has been prepared by Travis Kidson and Jack Fournier who are Portfolio Managers for iA Private Wealth Inc. and does not necessarily reflect the opinion of iA Private Wealth. The information contained in this newsletter comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors. The Portfolio Managers can open accounts only in the provinces in which they are registered.

iA Private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. iA Private Wealth is a trademark and business name under which iA Private Wealth Inc. operates.

Insurance products are provided through iA Private Wealth Insurance Agency which is a trade name of PPI Management Inc. Only products and services offered through iA Private Wealth Inc. are covered by the Canadian Investors Protection Fund.

Beacon Wealth Partners is a personal trade name of Jack Fournier and Travis Kidson.

2023 Q4 Newsletter