The Markets
The TSX is down 1.5% in February and up 1.7% year to date.
The S&P500 is down 0.9% in February and up 1.7% year to date.
The NASDAQ is down -1.7% and flat year to date.
We have published an article entitled U.S. Tariff policy in Flux.
And here’s one from RBC Economics – 50 Ways to Leave your Lover as Paul Simon sang about
50 ways to leave your lover: Sizing the impact of a trade breakup - RBC Thought Leadership
From our Portfolio Advisory Group (as of Feb 21, 2025 and it’s hard to keep up as things are changing so rapidly).
Investors need to deal with risk and uncertainty. Nevertheless, the noise level through the first few months of this year has admittedly felt higher than normal. The threat of tariffs, a surprise development in artificial intelligence, higher U.S. inflation, and a major shift in U.S. policy with respect to the war in Ukraine, among other things, are just a few of the challenges that investors have faced this year. But, global equity markets have been resilient in the face of these issues and are higher year-to-date. Moreover, government bond yields are close to the levels they were at to start the year. And, the beleaguered Canadian dollar, has shown signs of life of late as it has strengthened recently. We discuss this more below.
Tariffs continue to be on everybody’s mind. Despite many threats, the U.S. government has undertaken one action so far: an additional 10% tax on Chinese imports (the U.S. had pre-existing tariffs on Chinese goods). Yet, the risk of new tariffs remains: the U.S. is expected to revisit its plans for Mexico and Canada in early March, it is planning tariffs on all steel and aluminium imports later next month, and it seems tempted to bring Europe into its crosshairs in the not-too-distant future. But, markets have thus far taken the view that the worst-case scenario has already been avoided: wide ranging tariffs that were expected to be enacted over a month ago. Instead, delays, extensions, more targeted tariffs, and exceptions have emerged as the strategy so far. Should this persist, the approach seems consistent with what was experienced during President Trump’s first term in office.
On the artificial intelligence front, a Chinese company, DeepSeek, unveiled an AI model that demonstrated impressive performance relative to leading models developed in the U.S. It quickly surpassed OpenAI’s ChaptGPT as the most downloaded application on Apple’s App Store. The company suggested it was able to develop its AI model at a fraction of the cost of U.S. models. Moreover, it succeeded despite significant constraints as the U.S. government had restricted its ability (given it is a Chinese company) to access some of the world’s most powerful chips. It served as a reminder that innovation is alive and well in China. It also raised more questions around the significant amounts of capital that continue to get deployed by U.S. technology firms. That led to some volatility in the tech space. Given elevated valuations of tech stocks that reflect high expectations, and the level of concentration of the tech sector within the U.S. market, we expect developments in AI to remain very important for the U.S. market.
Another challenge investors had to grapple with recently was the U.S. inflation reading for the month of January. It was higher than expected and the breadth of inflationary pressures also widened, suggesting a broader range of goods and services are experiencing some pricing pressures. While it’s just one month worth of data, investors will undoubtedly be watching to see if these pressures persist over the months to come. These views were shared by members of the U.S. Federal Reserve who suggested they are reluctant to lower interest rates any more until further progress on inflation is made.
Global equities have performed well despite these headlines. It suggests markets are looking past the noise and continue to have confidence in the earnings growth potential over the next few years. However, we do not think investors should be complacent in the wake of the market’s resilience. We continue to watch for additional signs that corroborate the market’s strength. One such indicator is rising market breadth, which would suggest that an increasing number of stocks are making new highs. Should this occur, it would help confirm that the bull market for stocks continues to be on solid footing.
Wealth Management
RRSP contribution deadline is Monday March 3 for the 2024 tax year.
I am sharing our tax planning guide again this month. Please wait until all investment tax slips are out before taking your entire package to your tax preparer. Page 2 of our packages tell clients what tax slips to expect. Page 4 outlines fees, if applicable, which are tax deductible and your tax preparer will require this page. Revised fee page for some clients which were affected will be out the first week of March.
Tax reporting guide – RBC Wealth Management
A note from the CRA on the Capital Gains Inclusion Rate increase – deferred until Jan 1, 2026.
The Department of Finance recently announced that it will introduce legislation in Parliament in due course, related to the capital gains inclusion rate change with a new effective date of January 1, 2026. The announcement confirmed the government’s intention that, effective for dispositions that occur on or after January 1, 2026, the inclusion rate will increase from one-half to two-thirds on capital gains realized in excess of $250,000 annually for individuals and on all capital gains realized by corporations and most types of trusts.
The CRA is working diligently to update its systems to reflect the currently enacted capital gains inclusion rate of one-half. However, this update may not be completed when online filing becomes available on February 24, 2025. If you are impacted by this situation, you may avoid processing delays by waiting until the updates are completed in the coming weeks before filing your income tax and benefit return. The CRA will grant relief in respect of late-filing penalties and interest until June 2, 2025, for Individual filers and until May 1, 2025, for Trust filers, to provide additional time for taxpayers reporting capital gains to meet their tax filing obligations.
2025 Handy Financial Planning Facts – attached here. Clients often ask about taking CPP at age 60 vs deferring to 65. At age 60, the maximum CPP is $917/month at age 65 it’s $1433/month and $2034 at age 70. I would normally recommend waiting to take it till at least age 65 barring circumstances such as shortened life expectancy.
In the Community
Our office is celebrating International Women’s Day on March 5 with a lunch with guest speaker Victoria Marshman. She will talk about how a single act of kindness set her on a course towards purpose driven entrepreneurship and philanthropy where she has raised over $300,000 for Canadian Charities.
I will be volunteering along with other RBCers at Durham Feed the Need on March 13 for a couple of hours.
In my last update, I share the Hearth Place Annual Gala which is upcoming on May 3. We are looking for donations for our silent auction table, as well we have a “bucket of booze” that we are selling raffle tickets that evening. Donation for the silent auction table and for the bucket of booze are welcome. I can pick up or items can be dropped off directly at Hearth Place Cancer Support Centre at 86 Colborne St W in Oshawa. I will be sponsoring the Gala, as well, RBC Foundation is a sponsor for the event.
Team News
Kim will be off on Friday March 14. In April I will be taking two weeks’ vacation – the weeks of April 14 and 21st. Good Friday falls in there as well and our office will be closed for Good Friday on April 18.
While I’m on vacation I will log on and check emails once/day. If anyone anticipates needing anything, please contact me prior to April 14. Kim will be here when I’m off.
The days are getting longer and we move to Daylight Savings Time the weekend of March8/9. Spring is approaching!