A tailwind for the Canadian stock market

Jan 15, 2021 | Elinesky Schuett Private Wealth Management


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Your weekly update from Elinesky Schuett Private Wealth Management

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This week, our featured economic commentary focuses on the impact of cyclical stocks and the tailwind for the Canadian stock market. The latest #MacroMemo video from Eric Lascelles, Chief Economist with RBC Global Asset Management, provides additional insight into the economy and the global impact of COVID-19.

 

On Thursday, January 21, RBC Wealth Management is hosting Your Minds Matter™, a panel discussion on how women can prolong their brain health as they age. Your invitation and RSVP information is below.

 

For those of you who are working from home, you may be interested in reading the article Deducting home office expenses for 2020. It details the simplified deduction rules for salaried and commissioned employees. For business owners, RBC has put together their Top 10 Business Articles of 2020 and posted the links to them all on one page – There are a number of ‘must read’ articles on this list!

As always, we end our weekly post with a few good news stories from in and around our community. 


Your economic update

Things were relatively calm over the past week, as evidenced by the decline in market volatility. It’s been reassuring, despite the headlines around the global COVID situation that continues to remain troublesome. Growing comfort with the incoming U.S. administration has likely contributed to investor sentiment, particularly given another large stimulus package that will be among the very first items on the government’s agenda. One of the underlying trends that began late last year, with the so-called “cyclical” stocks leading the market, has remained very much in place to start the year. For now, this presents a tailwind for the Canadian stock market. We explain a bit more in our update below.

 

Coronavirus Update

The bottom-line remains the same as it has for some time: The virus spread is proving to be very difficult to contain despite significant efforts around the world. The hope is that in the months to come, we will start to see evidence of growing immunity and a slowing of the spread. The Middle East may provide some early clues around that thesis in the not too distant future. The region is more quickly vaccinating its population, with Israel leading the way at more than 20 percent of its population vaccinated – The United Arab Emirates and Bahrain are not too far behind. The 70 percent threshold is widely considered to be a minimum level needed to approach some form of herd immunity.

In Canada, the seven-day average rate of new daily infections stagnated this past week, an encouraging sign given the post-holiday surge witnessed more broadly across the provinces a week ago. Some are faring much worse than others, with Saskatchewan and Ontario leading the way. Positively, there was a slowing in the average rate of new daily infections across Quebec, British Columbia, and Alberta. Meanwhile, Manitoba’s average new daily figures are nearly half of what they were a month ago, suggesting its measures have been successful at slowing the spread. In the Maritimes, the spike in new cases at the beginning of the year has not worsened, leaving a stable situation for the time being.

Cyclicals leading the way

The investment community often segments the stock market into different categories, such as growth and value. “Growth” is defined by stocks with high revenue and earnings growth, and “value” is often regarded as stocks that are inexpensive and trading at low levels relative to their earnings, cash flow, or book value.

For some time, and in particular during the past year, those categorized as growth stocks meaningfully outperformed. Many of these were regarded as having business models that would not only fare much better, but even thrive through the disruptive environment that remains to this day. However, late last year that sentiment appeared to shift, with value stocks beginning to perform better based on the growing conviction that a combination of successful vaccines and enough fiscal stimulus would lead to a sustainable global economic recovery that could help revive their earnings and cash flow. That trend remains in place to start the year and is helping some parts of the market that were particularly hard hit in 2020.

Many of the aforementioned value stocks represent businesses that are cyclical in nature, meaning their revenue and profits are heavily tied to the ebbs and flows of the general economy. The Canadian stock market has its fair share of these cyclical types of stocks across sectors, such as Energy and Financials. Consequently, it’s not too surprising that the Canadian equity market has been performing a bit better than some of its global peers to start the year. We suspect this may continue for a little while longer.

It is very challenging to predict the timing of shifts in investor sentiment and performance of various styles and groups of stocks. Nevertheless, we continue to view the recent trends as a sign of confidence in the eventual recovery that may be upon us once we get through the challenging first half of the year. As always, our approach is less focused on timing and more geared towards having well-constructed and diversified portfolios that inevitably offers exposure to a range of investments across these categories.

Swirling events: #MacroMemo with Eric Lascelles

In this video, Chief Economist Eric Lascelles looks at the economic impact of growing COVID-19 infections in Canada and the U.S., including record job losses and the possibility of rising inflation. He also shares his thoughts on the Democratic Senate wins in Georgia, and how he anticipates markets to respond.

Watch the video or read the transcript online: Swirling events: #MacroMemo with Eric Lascelles

A laptop on a desk with a man on the screen. Text reads: RBC Global Asset Management. Swirling Events. #MacroMemo with Eric Lascelles

Watch time: 15 minutes

 

Year in Review: RBC’s Top 10 Business Articles of 2020

RBC has put together a list of some of their most-read articles of 2020 - The list includes tips for stress management, inspiring stories of resilience, advice on cybersecurity, cash management, and so much more.

If you're looking to be inspired, listen to the "Small Business Matters" Podcast series with Tony Chapman where he shares stories from entrepreneurs across the country.

Here is your link to the full list: RBC’s Top 10 Business Articles of 2020

Picture of a road with yellow dotted lines. In between each dot is the following text, 2020, 2021, 2022


An Invitation: Your Minds Matter™

Please join us for a panel discussion on how women can prolong their brain health as they age.
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Thursday, January 21, 2021
2:00 P.M. ET

RBC Wealth Management Canada, in collaboration with Women’s Brain Health Initiative, is pleased to invite you to a virtual discussion with some of Canada’s leading scientists in women’s brain health, on lifestyle choices that can prevent brain-aging diseases.

Moderated by Lynn Posluns, Founder of Women’s Brain Health Initiative, the panel of experts will explore:

  • the importance of gender-based research and the need to study brain changes before dementia sets in,
  • how the female body and brain are interconnected, and
  • the impact on the brain of hormone fluctuation and cessation, pregnancy, female medical treatments, lifestyle, diet and exercise.

 

Picture of a woman with red hair with a purple scarf and dark top

Moderator
Lynn Posluns
Founder and President, Women’s Brain Health Initiative

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Speakers
Dr. Gillian Einstein
Professor of Psychology at the University of Toronto and The Wilfred and Joyce Posluns Chair in Women’s Brain Health and Aging

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Dr. Teresa Liu-Ambrose
Professor of Physical Therapy and Canada Research Chair in Physical Activity, Mobility, and Cognitive Neuroscience

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Dr. Natasha Rajah
Professor of Psychology and Psychiatry at McGill University and the CIHR Sex and Gender Chair in Neuroscience, Mental Health & Addiction and Director of the Brain Imaging Centre at Douglas Research Centre

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Dr. Liisa Galea
Professor of Psychology and Psychiatry at University of British Columbia

Virtual event details

  • This event will be hosted on the BrightTalk platform to ensure video stability and track user engagement.
  • You will need to register for the event on BrightTalk. Like other digital platforms, we must comply with anti-spam law and you need to provide your name and email address to register for the event. You will only be asked for this information once. You can adjust your settings to ensure you only receive the information you want.
  • BrightTalk will not sell your information and does not have access to any of your financial information.
  • Once you have registered, you will receive a link to attend the event.

    Questions?
    Please email WMC National Office

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Deducting home office expenses for 2020

Millions of Canadians unexpectedly had to start working from home due to the COVID-19 pandemic. In response, the government announced plans in their Fall Economic Statement to simplify the process for deducting home office expenses. On December 15, 2020, the Canada Revenue Agency (CRA) released the details on a simplified method for claiming these expenses for 2020. This simplified method has made the home office expense deduction available to more individuals.

This article discusses the circumstances in which home office expenses incurred by salaried and commissioned employees are deductible, as well as whether allowances and reimbursements provided by an employer are taxable.

Download your PDF copy of the article here: Deducting home office expenses for 2020

You are welcome to share this article with your colleagues, friends, or family members who are working from home.

Have questions? Please let us know if you have questions about your tax situation or are looking for a tax professional to assist you with your 2020 filing. We are happy to introduce you to one of our trusted connections in the community.

 

Community Corner

Each week, we like to end our posts with a few good news stories from in and around the community. We hope that they brighten your day!

As always, we are available to connect with you personally. Please don’t hesitate to contact us at 519-822-2024 or elineskyschuett@rbc.com.