It is certainly hard to believe that the end of April is on the horizon.  For those of you who are working on your taxes this weekend – good luck and as a friendly reminder the reporting deadline for income taxes for the 2023 tax year are as follows:

• For individuals, filing and payment due on April 30, 2024

• For businesses with business expenditures:

  • relating mostly to a tax shelter investment, your 2023 return must be filed by April 30, 2024

  • other than those relating mostly to a tax shelter investment, your 2023 return must be filed by June 15, 2024

• If you have a balance owing for 2023, you must pay it on or before April 30, 2024.

 

Furthermore, given the recent proposal put forth in the Federal Budget for 2024 I will be hosting a webinar on Wednesday May 1^st at 7PM on Strategies to Manage the Proposed Changes in the 2024 Federal Budget – if you would like to attend you can Register Here.

 

Here at home this week, the focus has remained on the proposed changes in the 2024 Federal Budget.  You’d be forgiven for not being able to hear through the noise that proof the Canadian economy remains on weak footing came by way of a StatsCan report that highlighted Canadian output per capita has declined to 2017 levels, to $4,200 per person.  (Toronto Star) The decline can be attributed to tighter monetary policy that has restricted economic activity in the country, and moreover an outsized increase in Canada’s population over the last year has reduced productivity on a per capita basis. 

 

Given unemployment has reached 6.1%, labour productivity is also down.  Economic uncertainty in Canada has been reflected in equity markets as of late, however yields in the Canadian bond market have come down measurably since October of 2023 – indicating the market’s expectation that relief is in sight and perhaps the Canadian economy will be able to begin a recovery sooner rather than later.  Our outlook in Canada remains cautious and a neutral allocation to Canadian equities at this time, focused on large cap companies, remains your best option to mitigate risk in your portfolio. 

 

On Thursday, GDP growth data for the U.S. noted a marked decline in the first quarter of 2024.  Though still positive, coming in at 1.6% annualized, this figure reflected a slowdown from Q42024 which saw an annualized GDP growth figure of 3.4%.   Personal consumption and service spending remained elevated, however goods spending in the U.S. declined over the same period.  This has been directly impacted by price inflation that maintained a moderate upward trend over the first three months of this year.  However, there were positive notes in this week’s data – namely that businesses increased their spending on equipment, while spending on real estate slowed after a blistering increase of 13% in Q4 2024.   (RBC Economics)

 

Finally, U.S. consumer and producer demand appears to have remained robust as imports grew (+7.2%) at a faster rate than imports (+0.9%) over the quarter, which certainly bodes well for its trading partners.  The consumer and economy in the U.S. remain robust, and with the risk of inflation accelerating in the near term we have updated our expectation that rate cuts will come from the Fed in December.   The expectation of higher rates for the remainder of the year has reflected over the last several weeks in U.S. fixed income markets, as yields across the curve remain elevated – providing ample opportunity to add passive U.S. dollar income in your portfolio in the long-run.

 

Across the Atlantic in Europe, the inflation story continues to diverge greatly from the experience we are having here in North America.   A recent ECB survey noted that inflation expectations of Eurozone consumers has declined in March – with prices expected to advance 3% in the next 12-month period, which is the lowest level seen since December 2021. (BNN Bloomberg) Keep in mind Eurozone inflation in March came in at 2.4%, so clearly consumers are reasonably anticipating an upward tick in inflation like the one experienced by the U.S. Members of the ECB earlier this week cautioned against not cutting rates soon enough once it appears their inflation target is in sight.  An unwarranted delay could result in slowing the economy down too much and triggering a prolonged recession for which the Eurozone has been able to avoid.  European equity markets this year have rallied substantially off the back off improved growth and a dramatic improvement in inflationary pressure than was originally anticipated, and we continue to recommend cautiously adding exposure to this region in your portfolio.

 

In China, there has been notable dissent from the U.S. government passing legislation requiring ByteDance to sell their interest in TikTok or the application will be banned in the U.S.  This will most certainly be going to the U.S. courts but underscores the impact government reaction can have to the tech sector – though it is important to note the move has been driven primarily by U.S. security interest and India took similar action in 2020 banning the app in their country.  Finally, in Japan on Friday there was no change in the BoJ’s monetary policy, keeping their overnight lending target between 0.0%-0.1% as they face expected higher inflation in the months ahead.  BoJ head Kazuo Euda stated that if inflation does begin to rise, based on the data available they will decide to raise rates further.  As I’ve mentioned before, Japan has had a much different experience with inflation over the last 20 years than other developed economies – with positive inflation are relatively new economic concern after two decades of deflationary pressure.  (Yahoo Finance)