Team Reflections
It’s hard to believe that another year has gone by, and we’ve passed the 2-year mark since Margaret and Mathew partnered to create the Kothlow Unser Wealth Management Group. Margaret celebrated 30 years with RBC Wealth Management in 2024 and Mathew will be 10 years with the company in March 2025. Gino will be celebrating his 3-year work anniversary in February 2025 and he has been a tremendous asset to the team. Kim passed the Level 1 CFA Exam in the past year and reached the one-year mark with our team in October, after moving over from his role as a Financial Planner at RBC bank. His knowledge as a Financial Planner has been an incredible asset for clients.
On the personal side, Michelle and Mathew welcomed their third child, Marcus, on October 15, 2024. He’s bringing an enormous amount of joy to the family and his 2 older sisters couldn’t be happier. Margaret and Stephen were able to celebrate the birth of their second grandchild when their daughter Gabrielle gave birth to a son, Fenris, on May 5, 2024.
TFSA, FHSA and RRSP Contributions
The TFSA contribution limit for 2025 remains at $7,000. A Canadian Resident who has never contributed to a TFSA, and was 18 years or older in 2009, will have a cumulative total of $102,000 of contribution room.
The FHSA contribution limit for 2025 remains at $8,000. The lifetime limit on contributions to an FHSA is $40,000. Unlike a TFSA, you only begin accruing FHSA contribution room when the account is open. You can carry forward up to a maximum of $8,000 of unused FHSA contribution room to use in the following year. The deadline to contribute and deduct against your 2025 income is December 31, 2025.
The deadline to contribute to your RRSP and claim the deduction on your 2024 income tax filing is March 3, 2025. Your available RRSP contribution room for 2024 can be found on your 2023 Notice of Assessment from the CRA.
Market Update
The stock markets closed out a strong year on a quieter note as investors began to recalibrate their expectations for future interest rate cuts by the U.S. Federal Reserve. This shift in expectations led to a rise in government bond yields that continued in recent weeks. Below, we provide updates on recent developments in Canada and the United States.
The Federal Reserve cut interest rates at its mid-December meeting, as widely expected, despite inflation showing signs of being sticky. However, Fed Chair Jerome Powell struck a different tone on future rate cuts, stating that it will likely be appropriate “to slow the pace of further adjustments,” while acknowledging that the risks of economic weakness and inflation are relatively balanced. Policymakers’ projections revealed that they now expect to cut rates by only 0.5% in 2025—half of what was previously anticipated—and raised their inflation forecast for the year.
Closer to home, the Bank of Canada (BoC) also signaled the potential for a more restrained approach to interest rate cuts going forward. Markets currently expect 0.50% to 0.75% worth of rate reductions this year. However, it would not be terribly surprising if the BoC feels compelled to go further to avoid the risk of undershooting its 2% inflation target. The Canadian economy has been relatively lackluster, with expectations this may continue near-term, which has contributed to lower Canadian bond yields than in the U.S. The Canadian dollar has suffered as a result because global funds tend to flow towards higher-yielding currencies, thereby strengthening their value relative to lower-yielding ones.
Meanwhile, Canadian Prime Minister Justin Trudeau announced his resignation. This was somewhat expected following months of poor polling, recent exits of key officials within the Cabinet, and mounting calls for his departure. Nevertheless, his exit introduces significant political uncertainty at a time when the country is dealing with the threat of tariffs from the incoming U.S. administration. Trudeau will remain in office until his successor is selected, with Parliament suspended until late March. Although the Canadian government retains the power to impose counter-tariffs on the U.S. without legislative approval, the leadership void could complicate negotiations. This uncertainty is also weighing on the Canadian dollar.
Recent developments in Canada may not inspire a lot of confidence in investors. But it is worth noting that the Canadian equity market may not depend as much on political or economic developments at home as it once did. After all, Canadian equities were up nearly 20% last year despite the fractures that already existed domestically. Instead, other factors, such as falling interest rates and declining inflation, have arguably been more important. In addition, U.S. growth has benefited many of the Canadian businesses that have become increasingly tied to activity south of the border over the years. Therefore, in our view, it’s important not to get too swayed by developments at home.
Overall, we expect some continued pessimism about Canada and its near-term economic prospects. But interest rates may continue to move lower, which may drive some anticipation of better economic and earnings growth later this year. Meanwhile, sentiment is nearly the opposite when it comes to the U.S. The consensus view is for continued economic expansion, the emergence of regulatory and tax tailwinds, and for limited additional rate cuts. Investors should remain mindful that these expectations – positive for the U.S. and less so for Canada – are already reflected in current market valuations. It’s the potential for a change in the outlook, for better or worse, that will likely drive market movements. That is what we will be watching for in the months to come.
Should you have any questions, please feel free to reach out.
