Banner photo cred to Kael Rebick @punkodelish on Instagram.
A few topics our newsletter touches on this week:
- Our Thoughts
- Income Splitting – Prescribed Rate Down to 1%
- Listen – Online Trends & Their Impact on Investing with Mark Mahaney
- New Episodes in RBC Podcast Series “10 Minute Take”
- Distraction Content – Ottawa Tulip Festival
Our Thoughts
Stock markets were a bit lower this week on US Federal Reserve Chairman Jerome Powell’s warning of a prolonged recession. In addition, the World Health Organization floated this week that it believes COVID-19 may continue to exist in our communities for years, just as other viruses do while the global population builds natural immunity to it over time.
On the bright side, government restrictions are getting lifted around the world and the healing of economies has begun. While things will undoubtedly not be returning to “perfectly normal” anytime soon, we do expect economic activity, personal income, and corporate earnings to experience a rebound in the near-term as more restrictions get eased and people finally leave their homes. That said, it will be some time before the economy returns to full capacity. Our firm’s own economists expect the output gap – measuring the potential and actual output of an economy – to last well over a year. This suggests government support programs could last longer and deficits will be larger.
Our focus is remaining disciplined through this period. Every recession has its own story and this one is certainly unique. Two considerations keep us grounded in our long-term approach. First, the resiliency and ability of human kind to adapt and innovate over time should never be underestimated. This has been proven throughout history with other devastating episodes such as wars, financial crises, natural disasters, and even pandemics. Second, the earnings of most well run companies have a tendency of gravitating back to their long-term rising trajectories after periods of crisis. We believe these longer-term perspectives will continue to help guide us through this period.
Income Splitting – Prescribed Rate for Spousal Loans Back Down to 1%
Currently, the CRA prescribed interest rate is at 2% but it will be decreasing to 1% for the quarter beginning July 1, 2020. As the interest rate on a prescribed rate loan is locked-in for the life of the loan regardless of any future interest rate increases, setting up a new loan at 1% may lead to significant tax savings in future years. You can read more about this strategy here. If you are interested in discussing further whether this strategy is right for you please give us a call.
Listen – Online Trends and their Impact on Investing with Mark Mahaney
Top-ranked internet analyst Mark Mahaney, Managing Director with RBC Capital Markets, joins Janet Engels, Head of the Portfolio Advisory Group – U.S., to discuss the impact of COVID-19 on online trends. Mark will share his views on the impact of COVID-19 on online consumer spending, zeroing in on whether trends have shifted permanently and if new trends will emerge. Listen here (approximately 15-minute duration).
The 10 Minute Take – RBC Podcast Series *new episodes*
New episodes will get posted regularly to discuss various issues front and center during the COVID-19 crisis. Recent highlights include spotlight episodes on the road to recovery for each province across Canada. Check out the latest episodes here.
Distraction Content – Tulip Festival!
The Ottawa Tulip Festival is online this year! Check out their great website and various social media feeds (Facebook, Twitter, Youtube) for online tours and content recognizing the 75th anniversary of Canadian-led liberation of the Netherlands during World War II. Really worth checking out, the Youtube channel includes a message from the Dutch royal family, video tours of the gardens and great videos (in both official languages) for kids.
Our team is here for you
We are all working remotely, so the best way to communicate with us continues to be by phone, e-mail or video chat. We are also available if you have friends or family who might be seeking a consult on their portfolio, wealth or estate planning goals.
Regards,
Mark, Peter, Sarah, Corinne & Andrea