The 5 - Minute Review Archive

Taxes-- oh, that five-letter word that all of us dislike-- are likely to go up in the next couple of years. The question is, how do stock markets perform when taxes are increasing? Stay tuned to find out.

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Welcome to the 5-Minute Review for November 2021. My name is Karim Visram, and I'm a portfolio manager at RBC Dominion Securities. I hope this finds you and your family well, healthy, and safe. Equity investors approach the months of September and October with seasonal trepidation, aware that corrections and even more serious market weaknesses have often played out in early fall. For much of September, that caution appeared well-founded.

After posting a new high on September 30, S&P 500 declined in early October and was down almost 6% at its lowest. However, October proved to be a reversal, with markets recovering to what they lost in September to new highs. The top five events that impacted the markets last month or so were, number one, the US economy grew at a tepid 2% in Q3. That was a sharp decline from 6.3% in Q2. Number two, FOMC announced that it would begin to taper its asset purchases later on this month.

Bank of Canada announced that it was tapering a few months ago. However, monetary policy still remains very, very accommodative. Number three, Canada's prime-age labor force, as shown in this chart, is at a record high. In just 19 months, employment in Canada has returned to pre-pandemic level and ahead of the US recovery. Number four, Canada and the US borders have now opened to non-essential travel for fully vaccinated travelers. This is good for the economy and economic activity. And five, inflation has remained high, but I believe it has peaked, and we will start to see lower inflation latter half of 2022.

How does all this affect your investments? The US Federal Reserve and Bank of Canada both appear to be walking towards tightening interest rates latter part of 2022-- in the second half of 2022. You remember, the year leading up to the first Fed hike and the year following the first Fed hike are generally pretty good for the stock market. Therefore, I would continue to moderately overweight equities. You remember, it is important to take a disciplined approach to investing and stay focused on your long-term goals and maintain a diversified portfolio to maximize potential returns and minimize volatility.

And now, to the answer to our question-- how do the stock markets perform during rising taxes? Again, I stress I do not want higher taxes. But as you can see looking at this chart, contrary to what many believe, Canada is not a country with high corporate taxes. In fact, its tax rates are below the proposed minimum global tax rates. Again, I stress this doesn't mean I want higher taxes. I'm just looking at the facts at this stage and bracing myself for it.

What does this mean to the stock market? Now, as you will see from this chart, markets seem to do better on average during the years of the tax increases than normal year without tax increases. During average years, S&P 500 is up around 9% on average since 1950s. However, the year that taxes went up, markets actually did better, strangely enough. Moderate tax increases do not mean poor markets. We may hit a speed bump or two, but the markets tend always to recover, so stay focused.

As to the years in which we had increases in the US, you will see from this table that there have been many years since 1950 that taxes did go up. It's not a surprise that the most common tax increase was the capital gains taxes, followed by personal taxes, and then last was the corporate taxes. Before I close, I want to remind you all this is the perfect time to look at your portfolios for any potential tax-loss harvesting. If you don't know what I'm talking about, please feel free to give me a call, and we can talk about this particular topic.

I hope you found this video informative. Please feel free to forward it to anyone you think may find it valuable. I welcome any feedback you may have how to improve these videos for you. Should you have any questions, please feel free to call me at 416-956-8888, or you can email me at karim.visram@rbc.com. You can also find a lot of information on our website, which is www.karimvisram.com. 'Til next time, please stay safe.

Taxes-- oh, that five-letter word that all of us dislike-- are likely to go up in the next couple of years. The question is, how do stock markets perform when taxes are increasing? Stay tuned to find out.

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Welcome to the 5-Minute Review for November 2021. My name is Karim Visram, and I'm a portfolio manager at RBC Dominion Securities. I hope this finds you and your family well, healthy, and safe. Equity investors approach the months of September and October with seasonal trepidation, aware that corrections and even more serious market weaknesses have often played out in early fall. For much of September, that caution appeared well-founded.

After posting a new high on September 30, S&P 500 declined in early October and was down almost 6% at its lowest. However, October proved to be a reversal, with markets recovering to what they lost in September to new highs. The top five events that impacted the markets last month or so were, number one, the US economy grew at a tepid 2% in Q3. That was a sharp decline from 6.3% in Q2. Number two, FOMC announced that it would begin to taper its asset purchases later on this month.

Bank of Canada announced that it was tapering a few months ago. However, monetary policy still remains very, very accommodative. Number three, Canada's prime-age labor force, as shown in this chart, is at a record high. In just 19 months, employment in Canada has returned to pre-pandemic level and ahead of the US recovery. Number four, Canada and the US borders have now opened to non-essential travel for fully vaccinated travelers. This is good for the economy and economic activity. And five, inflation has remained high, but I believe it has peaked, and we will start to see lower inflation latter half of 2022.

How does all this affect your investments? The US Federal Reserve and Bank of Canada both appear to be walking towards tightening interest rates latter part of 2022-- in the second half of 2022. You remember, the year leading up to the first Fed hike and the year following the first Fed hike are generally pretty good for the stock market. Therefore, I would continue to moderately overweight equities. You remember, it is important to take a disciplined approach to investing and stay focused on your long-term goals and maintain a diversified portfolio to maximize potential returns and minimize volatility.

And now, to the answer to our question-- how do the stock markets perform during rising taxes? Again, I stress I do not want higher taxes. But as you can see looking at this chart, contrary to what many believe, Canada is not a country with high corporate taxes. In fact, its tax rates are below the proposed minimum global tax rates. Again, I stress this doesn't mean I want higher taxes. I'm just looking at the facts at this stage and bracing myself for it.

What does this mean to the stock market? Now, as you will see from this chart, markets seem to do better on average during the years of the tax increases than normal year without tax increases. During average years, S&P 500 is up around 9% on average since 1950s. However, the year that taxes went up, markets actually did better, strangely enough. Moderate tax increases do not mean poor markets. We may hit a speed bump or two, but the markets tend always to recover, so stay focused.

As to the years in which we had increases in the US, you will see from this table that there have been many years since 1950 that taxes did go up. It's not a surprise that the most common tax increase was the capital gains taxes, followed by personal taxes, and then last was the corporate taxes. Before I close, I want to remind you all this is the perfect time to look at your portfolios for any potential tax-loss harvesting. If you don't know what I'm talking about, please feel free to give me a call, and we can talk about this particular topic.

I hope you found this video informative. Please feel free to forward it to anyone you think may find it valuable. I welcome any feedback you may have how to improve these videos for you. Should you have any questions, please feel free to call me at 416-956-8888, or you can email me at karim.visram@rbc.com. You can also find a lot of information on our website, which is www.karimvisram.com. 'Til next time, please stay safe.

Technology and technology jobs, where do you believe is the largest tech center in North America? And where do you think the growth of the tech talent has been the fastest? Stay tuned to find out.

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Welcome to the final review for August 2021. My name is Karim Visram. And I'm a portfolio manager with RBC Dominion Securities. I hope this finds you and your family well, healthy, and safe.

This summer ended with a noteworthy decision from the Federal Reserve, that it's nearing a decision to withdraw some of its stimulus given, that its confidence in the US economic recovery. Fed Chair Jerome Powell was careful to reassure investors that any interest rates hike were still ways off. Global equity markets have responded favorably, with many making new highs. The exception being the emerging markets, China.

Contrary to the US Fed, the Bank of Canada has already started downsizing is asset purchase program, decreasing it three times already. Many believe that any further downsizing of this program is now off the table, as the Canadian economy is slowing down. All major indices finished higher last month, with the S&P 500 was able to clinch its seventh month of gains after finishing the month of August up 2.9%.

As for the Canadian economy, it stalled in the second quarter and declined 1.1%. That was the first decline since the second quarter of 2020. Economists were expecting a 2.5% expansion. So it was fairly disappointing.

The five most notable events impacting the markets last month were, first, the August US non-farm payroll rose only $235,000 verses expected of $720,000. This was the worst month since January, as heightened fears of the pandemic and the spread of the Delta variant spread around in the US. Second, US regulators have fully approved the Pfizer-BioNTech vaccine. The move boosted hopes amongst health authorities that hesitant individuals on both sides of the border will get their vaccine shot.

Third, China will implement a new screen-time rule for kids under the age of 18. One of the rules which will regulate which day, what time, and how long kids can play online video games. Is this a good thing or not? We'd love to hear your thoughts on that.

Fourth, bank earnings. The Canadian banks reported a clean sweep with earnings beating consensus estimate. The banks continue to benefit from benign credit risk environment. Five, high job vacancy rate. Businesses unable to find enough workers may force to operate at reduced capacity. This will impact economic recovery. And last is an honorary mention, Charlie Watts, the impeccably dressed drummer of my second favorite band, passed away at a tender age of 80 a few weeks ago.

As to the equity markets, I remain positive, not withstanding that the prospect of greater volatility that investors have been used to the last 12 months. I believe most major equity markets should be able to deliver worthwhile total returns, including dividends, over the next 12 months. And hence, I remain overweight equities.

Now, to the answer to our question. As Axios has reported in this chart, there have been constant brain drain from the US to Canada. It may come as a surprise to many of you that the largest tech talent center in North America are actually in Canada, not in the US. As this chart shows, several cities, large and small, saw huge gains in the tech talent in the last five years.

Amongst the cities with the fastest growth was Toronto. Toronto is the third largest center after San Fran and New York. But it grew at 43%. Montreal, which is the 10th largest, grew at 31%. Amongst the smaller markets, Edmonton grew the fastest at a whopping 53%, faster than Toronto, and Calgary at 18%.

I hope you found this video informative. Please feel free to forward it to anyone you think may find it valuable. I welcome any feedback or any suggestions you may have on how to make these better for you. Should you have any questions, please feel free to call me at 416-956-8888, or you can reach me at karim.visram@rbc.com. You can also find a lot of information on our website, which is karimvisram.com. Thank you for watching. Until next time, please stay safe.

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Six straight months. July was the sixth straight month of gains in global stock market. Now the question is, how does the stock market perform after such a winning streak? Stay tuned to find out.

Welcome to the 5-Minute Review for July 20, 2021. My name is Karim Visram. And I'm a vice president and portfolio manager with RBC Dominion Securities. I hope this finds you and your family well, healthy, and safe.

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As we enter the second half of 2021 the global economy is shifting to an expansion phase from a recovery phase. Here are my top five market-related events for the past month.

One, the US economy returned to its pre-pandemic level in the second quarter, but the fast-spreading delta variant is causing concern. And it may slow down the economic growth for the balance of the year.

Two, approximately a third of the S&P 500 listed companies and a fifth of the TSX-listed companies reported very, very strong corporate earnings. Including some of the biggest tech companies.

Three, US inflation jumped 5.4%. The highest level in 13 years. But the Feds [INAUDIBLE] to its inflation was transitory story. We will have to wait and see.

Four, treasury yields, which was earlier in the year due to inflation pressures, eased in the past month. The Fed and the Bank of Canada held its interest rate at 0.25%. And five, making equities great, again.

As you can see from this chart, President Biden has delivered the highest market return in its first 100 days of any president in 75 years. JFK was not that far behind. The major question now is, how does all this impact our investments?

I'm beginning to transition portfolios-- our portfolios-- from a central bank-led economic recovery to a more self-sustaining economic growth. The transition in the economy will result in some short-term volatility. Especially in August and September, which are normally volatile months, anyways. However, normal economic activity should resume and expand throughout the remainder of the year.

The pace of growth will likely be slower, but this is understandable. As we have come from a record-breaking 12 months of economic growth. Regardless of where we are in the market cycle, it's important to take a disciplined approach to investing and stay focused on your long-term goals.

I continue to maintain a diversified portfolio to maximize potential return and minimize risk. Remember, you diversify to reduce risk and overall volatility of your portfolio. Also, make sure to review and re-balance your portfolios regularly to stay on track.

Now to the answer to our question. How does the stock market perform up to six consecutive months of gains? There have been 51 such occurrences since 1970 that the S&P 500 had six consecutive market growth. This chart from RBC Global Asset Management shows how, on average, the S&P 500 is done after six consecutive months of positive return. Looking at historical results to see that S&P 500 is following a similar streak in the past.

You will see, most of the time, S&P 500 continues to rise following such periods. After three months, the index was higher 2.6% and was higher 78% of the time. After six months on average, after 51 occurrences, the S&P was up 6.5%. After 12 months, on average, the S&P was up 11.8% and was higher 88% of the time after 12 months. Not a bad streak. So the message here is that when the economy is expanding, odds are in our favor that equities will continue to do well. Hence, I continue to over weigh equities over fixed income.

I hope you found this video informative. Please feel free to forward it to anyone you feel they may find it valuable. I welcome any feedback you may have, how to improve these videos.

Should you have any questions, please feel free to call me at 416-956-8888. Or you can email me at karim.visram@rbc.com. You can also find a lot of valuable information on the markets and the economy on our website, which is www.karimvisram.com. Thank you for watching. Till next time. Please stay safe.

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About one year, that's how long it took to develop the vaccines to Covid-19. Ever wonder how long it has taken for other vaccines to be discovered. Stay tuned to find out.

Welcome to the 5-Minutes Review for June 2021. My name is Karim Visram and I'm a vise president and portfolio manager with RBC Dominion Securities. I hope this finds you and your family well, healthy and safe.

Nothing that has transpired in the past six months has fundamentally changed my economic outlook for the remainder of 2021 or for 2022. I expect all the developed economies led by the US will post above average GDP growth for this year and probably next. Absent a forceful return of the pandemic, the momentum provided by massive fiscal and monetary stimulus should keep most of the economy's powered throughout next year and probably beyond.

Robust growth this year followed by slower but still above average growth next year looks like the most likely outcome. For the all important the US economy, the view supported by RBC economic recession scorecard. As you will see from this table, that all six of the leading indicators of recession are giving the economy a decisive green light. And strong enough to suggest another recession which is the enemy of the stock market is a long way away.

Also the year before the first rate hike, which is expected in 2023 and the year after generally both pretty good for the stock market. That does not mean we will not see corrections and bumps along the way. Remember, it is never a straight line up. One thing to keep in mind is, August and September are historically been the worst months for the market. However, the fourth quarter is generally the best quarter for the stock market also.

The predominant risk in most of the world right now remains the same as it has been for some time, Covid-19. The Delta variant is rapidly becoming the dominant strain in many parts of the world. And now, the lambda variants spreading in South America.

Another concern this year has been the potential for sustained inflationary pressure. This will remain a source of risk until more evidence emerges that clarifies where the inflation is as transitory as the Fed hopes although the more entrenched. I believe the long term inflationary trends remain anchored by structural trends such as demographics, income inequality, globalization and technology enhancements. These trends cannot be changed very easily.

Now, to the answer to our question about vaccines. How long how does the discovery of Covid-19 vaccines compare to other vaccines in the past. You will see from this chart, where the red bars represent the timeline from when the pathogen agent was first linked to the disease. To the year the vaccine was licensed in the United States. You will see the rapid development of the Covid-19 vaccine shown at the very bottom was groundbreaking in 2020. I know, this has raised some concern to some people. I believe there are many reasons for this rapid development.

Such as, first, the high demand for these vaccines require billions around the world. And maybe annual boosters as well. Two, the research for the vaccines started right away, that had not happened before. Three, cooperation globally among the scientific community. Four, there was a lot of private and public capital coming together for this one. And five and not the very least, the use of new technology such as virus sequencing mRNA.

Technology I believe was the biggest part in the discovery of the Covid-19 vaccines. In fact, technology impacts every part of our economy and our lives as if you did not know that already. You will see from this chart how technology is impacting company productivity. You will see in 1986, it took an S&P 500 company eight employees to generate $1 million in revenue. Today, it takes two employees to generate the same revenue as it took eight employees back in 1986. This is largely due to productivity gains by the use of new technology.

So technology if used properly can help many parts of our lives like communications, healthcare, travel and many, many other parts of our lives. I hope you found this video informative. Please feel free to forward it to anyone you feel they will find it valuable.

I welcome any feedback, any questions you may have on how to improve these videos. If you can reach me at 416-956-8888 or you can email me at karim.visram@rbc.com. You will also find a lot of information on our website, which is www.karimvisram.com.

Thank you for watching, until next time, please stay safe.

Is a country's population and its demographics important to its economic power and political influence? Stay tuned to find out. My name is Karim Visram. And I'm a vice president and portfolio manager with RBC Dominion Securities. I hope this finds you and your family well, healthy, and safe.

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Welcome to the 5-Minute Review for May 2021. It has been an uneventful few weeks with volatility near lows for the year. Government bond yields have remained in a tight range for the past few months, which is in stark contrast to the larger swings witnessed earlier this year. Meanwhile, on the equity front, some stock markets have continued its slow grind higher. This includes the Canadian stock market.

Canadian equities have done well this year. Most of the strength can be attributed to the cyclical nature of the market. Nearly 60% of Canadian stock market is tied to sectors, such as financials, industrials, and commodities, all of which are heavily impacted by level of domestic and global economic activity.

OECD recently forecast a global economy to grow by 5.8% this year. Its forecast pace is fastest in 50 years. However, it warns that many poorer countries are being left behind and will take much longer than rich countries to return to prepandemic levels.

Over the past 20 years, Canadian stocks have mostly traded at a discount to the US market. However, recently this has started to reverse, but it is still a long way to go to return back to normal. With economic growth forecasted to be above average for 2021 and 2022, I continue to maintain a bias towards value stocks and equities in general, both domestic and global.

Now to inflation. Inflation concerns have come down somewhat for now, but they remain out there. For inflation to rise and get entrenched at a higher level, two conditions need to exist-- one, we need to see meaningful domestic wage pressures on a wide range of industries; and two, inflation also has to increase in other major economies, such as China and India as this has a significant impact on global commodity prices.

As you will tell from this table, the US experienced its worst sustained inflation in the '70s and '80s when prices were doubling every 10 years. The Fed had to push interest rates up to 20% in the early '80s to stop inflation. I don't see this happening this time around for several reasons, such as demographics and the use of technology, but we still have to be on the lookout.

Now to the answer to our question. Does country's population, demographics matter in its global economic and political influence? The simple answer is, yes, it does. However, population size and demographics are not the only determining factor. There are other factors, such as productivity of the population.

As you will see from this table, the top three economies in the world are also the ones with the largest population. As you will see from this chart, Canada's population has been growing at a slower and slower pace for the last six decades. The good news is, it is still growing. Its working-age population ages 16 to 64 has also been shrinking and population over 65 increasing at the same time.

This has a big impact on the country's economic engine and future prosperity. China realized this recently and has now reversed its one-child policy and encourage larger families. Again, population size is not the only determining factor to future prosperity, but it has a major contributing factor.

I hope you found this video informative. Please feel free to forward it to anyone you feel you may find it useful. I welcome any feedback you may have. Should you have any questions, please feel free to call me at 416-956-8888, or you can also email me at karim.visram@rbc.com. You will also find a lot of information in past videos on our website, which is www.karimvisram.com. Thank you for watching. Until next time, please stay safe.

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Which has been a better investment over the last 25 years, Canadian real estate or Canadian stock market? Stay tuned to find out.

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Welcome to The 5-Minute Review for April 2021. My name is Karim Visram. And I'm a vice president and portfolio manager with RBC Dominion Securities. I hope this finds you and your family well, healthy, and safe.

It was another relatively calm and solid month for global equity markets, with many oscillating near its all-time high. The Fed provided an update on its outlook. Its messaging around inflation and approach to monetary policy was largely consistent with what it's been telegraphing for some time now.

This was in stark contrast to Bank of Canada, which just last week indicated that it would begin incrementally reducing its purchases of Government of Canada bonds, or reducing QE. As a result of this divergence and the strength in commodity prices, we saw the Canadian dollar, notably strong of late, reaching a three-year high.

As outlined in this table, there are many reasons to be positive on the Canadian dollar, like the strong commodity prices, friendly relationship with the US administration, and fiscal stimulus spending. There are a few areas of concern, as well, such as President Biden's "Buy America" policy and a slower vaccine deployment in Canada. However, overall, I remain positive on the Canadian dollar, but believe most of the run is behind us.

On the earnings side, the global technology sector has become one of the most watched sectors globally for a number of reasons. As you can tell from the chart, four out of the top five companies and seven out of the top 10 companies globally are tech companies. Companies such as Microsoft and Apple have a market cap of close to $2 trillion or more. Tech is, arguably, the most important global sector, representing the largest weight, by far, in global equity markets. As a result, they have meaningful influence over the direction of global stock markets.

Last week's earnings reports, highlighted by very strong revenue growth, which helped remind investors that fundamentals remain solid and the future prospects are bright--

I believe it's important to manage your portfolio for potential risks, but ensuring it's well-diversified within exposures or factors and sectors. I remain positive on equity markets in the middle-- medium term and long term.

Now, to the answer we've been waiting for, "Did You Know?"-- real estate is Canadians' favorite pastime. And it's been hot, red-hot, for the last 12 months or, for that matter, 25 years. A common misconception of investors is that, historically, real estate has been a better long-term investment than equities.

Looking at this research done by RBC Global Asset Management suggests otherwise. You will see from this chart that compares markets all over Canada that Canadian equities have done better over the last 25 years. I believe the major difference is psychological. Canadians view real estate investment as long-term, and as they should, and are willing to hold them for decades, while we do not hold equities for decades. Many people hold equities for minutes, days, weeks, or months.

I believe a huge part of this is significantly high transaction cost in real estate compared to equities. You can buy and sell equities for pennies, or free sometime. The exception to this is a principal residence, which creates favorable tax treatment, and your stock portfolio does not. So next time you look at your stock portfolio, think in terms of decades, like the greatest investor of all time, Warren Buffett, does.

I hope you found this video informative. Please feel free to forward it to anyone you think may find it valuable. I welcome any feedback you may have. Should you have any questions, please feel free to call me at 416-956-8888, or you can reach me at karim.visram@rbc.com.

We also have a lot of information on our website, which is www.kairimvisram.com. Thank you for watching. Till next time, please stay safe.

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We are now in year two of this global pandemic. Who would have thought that it would take us two years or maybe more to come out of this pandemic and this recession would result in a red hot real estate market in North America? Not many. Welcome to The Five Minute Review for April 2021. My name is Karim Visram and I'm a Vice President and Portfolio Manager with RBC Dominion Securities in Toronto. I hope this finds you and your family well, healthy, and safe.

As we enter year two of this global pandemic, we are now seeing a widening gap between responses in Europe and in the US, both on the vaccination side and on the fiscal stimulus side. RBC Capital Markets has recently upgraded its 2021 GDP forecast. It is forecasting a whopping 8% growth in the US, 5% in Canada, and 4.1% in Europe.

In Canada, better than expected Q1 growth will put its GDP back at pre-pandemic level by Q2 of this year. That means GDP will have fully recovered from its March 2020 drop by some time Q2 of this year. This does not mean all the jobs will be back by then, that will take much longer I believe.

With vaccination rates increasing, the Canadian economy this year is likely to see some of the highest GDP growth rates in a very long time. With interest rates still near historical low levels, holding cash is not a very rewarding and borrowing is cheap, fueling a red hot real estate market. In the United States with solid economic data and a sense that increasing vaccination rates should dampen the impact of the recent uptake in case counts.

The benchmark S&P 500 index traded above its psychological import in 4,000 level for the first time last week. Pace of vaccinations in the US to grow, with more than four million Americans vaccinated last Saturday. That's a record. The anchor to the US GDP growth is expectation that the real consumer spending will hit double digit growth this year, fueled by high savings rate and a release of pent up demand as the economy reopens. Also, the announced details of the proposed infrastructure bill which seeks $2.25 trillion in spending over the next eight years will invest in transportation, renewable energy, and manufacturing, amongst other sectors.

In Europe. Having navigated through the first stage of the pandemic crisis well, Europe is now stumbling as it struggles to roll out its vaccination program. Compounding that is a fiscal stimulus that is much more longer term in nature than the immediate cash infusion that the US plan had chosen. European economic recovery has been lagging that of US, but I believe Europe's recovery will eventually pick up and the region should benefit from the global recovery, which should bode well for European equity markets as it is geared more to the reflationary market. As to the portfolio strategy I'm employing, I continue to overweight equity versus fixed income as I believe, we will see some of the strongest GDP growth this year than we've seen in decades.

Now, the Did You know? Many of us believe that having lived through this pandemic going on its second year, we will do things differently once we come out of this pandemic. Let's take a look at past shocks we have experienced and see if we actually did make these changes after that event. You will see from this table that no matter the event or the shock, from the war to end all wars to the Spanish Flu to 9/11 or the 1990 dotcom bubble, once we were past the shock we all went back to our normal lifestyle. And generally, nothing changed. I suspect this time will be the same as well, or will it?

I hope you found this video informative. Please feel free to forward it to anyone you think will find it valuable. I welcome any feedback, or suggestions you may have. Should you have any questions or concerns, please feel free to call me at 416-956-8888, or you can email me at karim.visram@rbc.com. You can also find lots of information on our website, which is www.karimvisram.com. Thank you for watching. Until next time, please stay safe.

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Welcome to The 5-Minute Review for March 2021.

My name is Karim Visram. And I'm a vice president, portfolio manager, with RBC Dominion Securities. I hope this finds you and your family well, healthy, and safe.

The main topic these past few weeks has been the global bond yields, which have been trending higher for some time. However, suddenly, we saw the increase in yields accelerate last week. For example, the US 10-year Treasuries increased from 50 basis points last August to 150 basis points last week. The German 10-year bunds increased from minus 85 basis points in March to minus 31 last week. The UK 10-year gilt increased from 8 basis points in July of last year to 76 basis points last week.

In percentage terms, these are huge, huge moves. Many investors think that the bond market is likely to stabilize. But unusual soft demand in recent treasury auctions may prove otherwise. We will just have to wait and see.

I've indicated before how bond yields are partially driven by higher inflation expectations. This is looking forward to the reopening of the economies. The reopening of economies in developed countries, I believe, is imminent.

Recent vaccine data from Israel-- well, their rollout is most advanced-- suggest vaccination does lower the transmission of COVID-19, further increasing optimism to the reopening of the economies. Inflation expectations are also on the rise in the US due to concern that a further fiscal stimulus is about to come.

I believe another relief package, perhaps in the order of $1.5 trillion, is going to be approved. That is in addition to $900 billion that was approved last December. The two packages put together represent almost 10% of the US GDP. That is big.

Fed Chair Jerome Powell suggested in his recent testimony to Congress that inflation fears may be overdone. He pointed out that the pace of improvement in the labor market has slowed, as has the overall economy, while prices remain rather soft in sectors that were most impacted by the pandemic. In other words, the US economy will likely remain below potential for some time to come, even if the economy reopens.

In Canada, last week, the banks reported their quarterly earnings for the period of November to January. The two themes were predominant in these results. The first was that the credit issues that arose at the start of the pandemic last year are now subsiding. Two, revenue growth across most business lines were stronger than expected.

How have I positioned our portfolio? I remain overweight in equities and global equities. I'm expecting increased volatility in 2021. As such, I'm looking for exposure to more attractively valued defensive stocks that can withstand this volatility. I think equities will continue to rise for the balance of this year's-- but good quality companies are a must.

Now to "Did You Know?"-- according to Wall Street Journal, the length of time a US homeowner stays in their same home has increased steadily. This is why the inventory of homes for sale is at a record low.

According to Redfin, a typical homeowner in 2020 remained in their same home for 13 years. That is increased from 2010, when it was 8.7 years. 1 in every 4 US homeowner has been in their own home for almost 20 years.

Now, before I end, I would like to take this opportunity to wish all my Irish clients, friends, and colleagues on the upcoming St. Patty's Day-- I would like to wish all of you a happy St. Patty's Day. I hope you all celebrate safely. On that special day, we are all Irish.

I hope you found this video informative. If you have any questions or any suggestions, please feel free to call me at 416-956-8888, or you can email me at karim.visram@rbc.com. You can also find a lot of information on our website, which is www.karimvisram.com.

Thank you for watching. Till next time, please stay safe, and happy St. Patty's Day.

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Welcome to the 5-Minute Review for February 2021. My name is Karim Visram and I'm a vice president and portfolio manager with RBC Dominion Securities. I hope this finds you and your family well, healthy, and safe.

Last week was an interesting week, to say the least. Volatility surged for a brief period. It was a series of extreme swings in that prices of a handful of smaller and heavily shorted stocks, such as GameStop, AMC, and Blackberry, that caught the markets by surprise. It is an evolving story that makes for good headlines. But I believe it has little to do with the broad outlook for the economy and the markets looking ahead.

So what happened? Over the past week, it was revealed that the large online community of retail investors have been responsible for the surge in these stocks. Acting together. They were able to buy vast amount of shares and options in these stocks, bidding up the prices and forcing some of the hedge funds to unwind their short positions at big losses. This development caught many by surprise, given the extent of some of the moves. The fact, it was fueled by some degree of coordination among retail investors socializing online was also noteworthy.

While it has limited implications for the outlook for the economy and the markets, it highlights the growing force of retail investor base that is willing to increasingly collaborate. However, I can't help but wonder how many of these investors are motivated by the potential for gains that they perceive to be quick, extreme, and easy. I believe most did not do proper due diligence on the stocks they were buying or paid little attention to the business value of the underlying stocks.

A question that I get asked most often is, is this a bubble? Given the exuberance in the different pockets of the markets, concerns are mounting as to whether markets may have entered bubble territory. The usual key ingredients to form a bubble in the financial markets include easy money and an enticing narrative, with both resulting in excessive behaviors and valuation.

The dot-com bubble is a case in point. When central bankers lowered rates ahead of the transition to the new millennium, NASDAQ went up four-fold from 1985 to 2000. Then, with money supply starting to tighten, NASDAQ had lost more than 70% of its value by the end of 2002. I'm not saying this is what's going to happen today. Today's financial markets are also grounded on easy money and many observers are worried about the rates rising when pandemic eventually ends.

Such concerns, I believe, are valid. I see a growing number of red flags rather than the definitive signs of a bubble, such as, one, the record low interest rates and a fear of missing out has washed investors who've taken more and more risk. Two, investors' attitudes are being shaped by headline gains in high profile, stocks such as GameStop, Bitcoin, or even Tesla. Three, increasing participation by retail investors. Being stuck at home with cash in the bank seems to have spurred an influx of day traders. Four, the IPOs last year in 2020 reached $347 billion. That is double what it was in 2019. Five, the median age of these IPOs in 2020 was only nine years. That's a second youngest since 2007.

In spite of the signs of concerns, I see less evidence of a bubble when I look at the stock market valuations, especially without the high flying stocks. On surface, the US equities appear expensive at the forward P/E of 22 times earnings. However, after excluding FAANG stocks, the forward P/E drops to about 17 and 1/2, which is marginally higher than the 10-year average of 16 and 1/2. Expensive, but not overvalued or not excessive.

I remain constructive and overweight in global equities, even though I'm expecting increased volatility this year. I continue to look for exposure to more attractive valued businesses that can withstand volatility.

I hope you found this video informative. Please feel free to forward it to anyone you feel they may find this valuable as well. Your feedback also is very welcome. Should you have any questions or concerns, please feel free to call me at 416-956-8888, or you can email me at karim.visram@RBC.com. You will also find a lot of information on our website, which is karimvisram.com.

Thank you for watching. Until next time, please stay safe.

Welcome to the 5 Minute Review for the month of October 2020. My name is Karim Visram, and I hope this finds you well and healthy and safe. As you can tell from my tie this week, that the main topic of discussion in this video is the US presidential elections.

Last week was full of drama. Yet the biggest surprise was not the results of the US elections, rather, the unexpected rally in global equity markets after the elections. This happened despite the uncertainty that still lies in front of us.

The market's reaction was surprising to many, including myself. Yet, it is not worthy remembering that leading up to the US election, markets were quite volatile in October. In fact, in October, most global equity markets were down approximately 3%.

This was due to three concerns, such as number one, the risk of a contested US election. This may still happen. Two, investors' anxiety over a blue wave, which is a Democratic-controlled White House and a Democratic-controlled chambers of Congress. We will find out in the next few days about that. And third, the second wave of COVID-19, which I will talk in a few minutes.

But first, with respect to the US election, looks like we have a new US President, Joe Biden, with the Senate remaining most likely Republican and the House remaining Democratic. We will again find out in a few days. This means we will most likely have a split government.

As I've said in my deeper-dive video, which was done a few weeks ago, the split government with a Democratic president and a split Congress appears to give the markets the best performance. In this chart, where blue represents Democrats and the red represents Republicans, you will see from the far right the best markets are when we have a Democrat president and a split Congress. That is what I believe we will have. We will find out in a few days.