Making a Difference (Dec.2016 SWM Letter)

This is a brilliant season in which most of us can reflect on our immeasurable blessings and opportunities.  I’m grateful for all the ways people are sharing to make a difference in the lives of others.  Across the street from our office is a church that hosts a food bank, also serves 14,000 hot meals a year, and offers toys and games this season to homes that otherwise would have none.  Our wider world hosts overflowing refugee camps where safety, sanitation, and education are hard to find.

We learn about ourselves in a world like this, and we open our hearts to help as we are able.  The Economist (Nov 26/16) summarizes CSR’s Global Wealth Report:  if we have $2,222 to our name we’re wealthier than ½ the world’s population.  With $71,560 we’re in the top 10% of global wealth.  Those with net wealth $744,400 and up qualify among the richest 1% in our world today and getting richer by the minute.  pic-_-xmas-toys

What better time to ponder how we live and use our financial values to mirror and express our core life-values …and even shape these for coming generations.  Special thanks:  (i) to a client with whom we’ve worked to complete a major gift to Joseph Brant Hospital in Burlington,  (ii) to those who have donated food and toys for local families,  (iii) for gifts to university student food banks, and (iv) finding in your heart to share humanitarian relief for those in greatest need worldwide.  Every bit counts!

Healthy Growth, Safely Diversified!

Had we invested solely in Russia or Brazil for 2016 we could have gained 50% or 35%.  Or in China or Switzerland we could have lost 12% or 8%.

In Canada’s strong market this year we could have put all our money on oil and gas (up 40%) and metals/materials (up 34%).  Banks and financials are always a major holding, up 20% this year.  Woe to anyone betting on the health index, down 50% and still falling.

Fact is, we don’t invest for a solitary season or year, sector or index.  Such behaviour raises risks and razes returns.  At a holiday party someone may boast of their investment luck in oil or copper, maybe banks.  (Losers seldom brag).  When we consider though how steadily our own accounts hold value and grow over the years, we can confidently focus on safeguarding money and purchasing-power for LIFE.

Some things haven’t been working so well for us this year.  (This doesn’t mean we’re throwing them away, but they favour our entry into 2017.)   Our holdings in global commercial real estate and infrastructure have been weaker this year.  These positions are due to rise and should prove valuable for 2017.  They reduce our risks when markets fall (like the 15% meltdown last January) and average 7-9% returns over several years.

Dividends remain a vital theme always.   Global dividends rewarded us brilliantly in 2015, and Canadian dividends similarly in 2016.  Remember we’re not hazarding any guesses whether domestic or global will take the cake in any given year – both are vital for a variety of reasons.  So 2015 our Global dividend focus rose near 20% (Canadian dividends down 10%) and in 2016 our Canadian dividend focus is currently up 21% (with global down 2%).

Bonds have been battered repeatedly this year.  It’s a shock with Brexit or a U.S. election, when bonds worldwide suddenly lose nearly $2Trillion.  When interest-rates are edging upwards, bonds trend downward.  We’ve spoken on this, and the levers of managing fixed-income investing, at FI blog.   This is a major reason why we position commercial real estate and infrastructure to complement bonds and sustain a stronger investment income.

In a Picture:  the World with Trump.

At times there is a single picture that can help simplify global news and investment markets.  One such picture (I’ll send if you ask me for it) is the stock-channel picture I share on occasion, which continues to illustrate that the U.S. is about mid-way between its extreme high & low estimates, and Canada is just slightly inside the bottom of its stock-channel, suggesting a high likelihood of continued growth over the year ahead.

Some 2017  forecasts from Eric Lascelles of RBC GAM:

  • Canada’s TSX currently near 15,100 may reach 15,825
  • S.A. S&P 500 now near 2,250 may reach 2,350.
  • MSCI Europe currently at 1,400 may reach 1,475.
  • London’s FTSE-100 at 6,900 may reach 7,100.
  • Japan’s Nikkei at 19,000 may be there still.
  • MSCI Emerging Markets at 860 may reach 925.

Interest rate expectations also from RBC GAM:

  • Canada 10-year bond now 1.59% to be 1.5%
  • U.S. 10-year bond now 2.38% to be 2.25%
  • German 10-year bond 0.28% rising to 0.40%
  • K. 10-year bond 1.42% rising to 1.50%
  • Japan 10-year now 0.03% slumping to 0%.

A single picture (below) is also from our RBC partners.  The president-elect’s plan to cut taxes, slash red tape on industry, and boost government spending suggests a significant boost for 2017 and 2018.  If trade can survive a higher dollar, and if corporate earnings were to rise too, this boost could rise even beyond today’s expectations.  Into 2019 and beyond there are higher risks posed by escalating debts, ongoing punishment from protectionist trade policies, and failure to increase participation in labour markets.

We know 2017 will host known and unknown stresses.  Brexit is taking shape (hard or soft?) and Trump will be tweeting from the white house.  Elections loom for France, Germany, Austria, perhaps Italy again too as their government collapses nearly every year.  We cannot see how such events will continue impacting the Euro-zone.  A reasonable hope is to continue finding 5-8% investment growth this year ahead …and whatever events arise along the way will be part of such a journey.

pic-_-trump-boost-and-drag

Merry Christmas, Happy Holidays, Peace!

We wish you personally every happiness and health while 2016 ebbs away and new windows of opportunity open for 2017.  I know some of you have been touched with sadness, sickness or other losses, and a holiday season can be clouded with darker shadows.  I’m thinking of a dear young girl, not yet 11, battling daily to “kick cancer’s freaking butt” and my heart goes out to her every day praying for her miracle.  Please add your prayers for her.  With all that’s in our world today, let’s put our hearts and hands together to add kindness and joy, light and love to others near and far.  And may 2017 surprise us with wonder and joy!

Yours in Financial Security for LIFE!

Brian Weatherdon, Certified Financial Planning, Retirement Coaching.

905-637-3500 x 223.   1-877-937-3500 x 223.  Brian@SovereignWealth.ca

Author:  A Lifetime of Wealth;  Protecting Life ...;  Halton Retirement Study.

** This monthly letter touches on key strategies in Canadian and global investing and Ret.Coach SEALfinancial planning. This letter is not an offer to sell any kind of security, insurance, or program. Historical returns and risk measures are not a valid guide to future performance. Returns whether historical or forecast are from publicly available sources and research from a variety of firms including but not limited to GLC, RBC, CIBC, Mackenzie, Franklin Templeton.  Opinions reflected in this letter belong solely to the author and no other body is responsible for the content expressed here. We value opportunity to consult alongside your legal and accounting firms to advance your financial security and unique goals. We are grateful always to receive your comments and questions.

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