- Best Year-to-Date Gain Since 2009 For Global Equities
Global markets are currently experiencing their most substantial year-to-date gains since the recovery of 2009 following the global financial crisis (Vishnoi, 2023). The MSCI World Index has increased by 16.2% this year, a close second to the 16.9% increase observed in 2009. This positive trend is fuelled by growing investor confidence from the expectations of reduced global inflation, potential additional economic stimulus from China, and the Federal Reserve's decision to halt its cycle of interest rate hikes. Interestingly, this market rally is taking place precisely as we enter the historically challenging months of August and September. Over the past decade, these months have consistently shown a tendency for market decline.
- All the Buzz About Tax-Free First Home Savings Account
Homeownership dreams seem farther out of reach than ever before, with affordability concerns hitting an all-time high. The Canadian government introduced a new financial tool called the Tax-Free First Home Savings Account (FHSA). This registered account offers the advantage of saving up to $40,000 tax-free (Canada Department of Finance, 2023). By combining features of the Registered Retirement Savings Plan (RRSP) and the Tax-Free Savings Account (TFSA), the FHSA offers the best of both worlds. Similar to RRSPs, the contributions made to this account are tax-deductible. At the same time, withdrawals intended for purchasing a first home, including those sourced from investment gains, remain non-taxable, aligning with the principle of a TFSA.
The FHSA has a yearly limit of $8,000 for contributions and a total limit of $40,000 over a person's lifetime. To open a FHSA, you must be a Canadian resident who is 18 years old or older and has never purchased a home before. Like a TFSA, a FHSA supports a diversified investment portfolio encompassing mutual funds, publicly traded securities, government and corporate bonds, and guaranteed investment certificates. Starting from 2023, individuals can fully utilize this annual cap. Additionally, the FHSA introduces a departure from the RRSP model, contributions within the first 60 days of a calendar year cannot be attributed to the previous tax year.
- Canadian Dollar Falls for Sixth Week
The Canadian dollar reached its lowest point against the U.S. dollar in almost three months due to a lack of positive factors supporting it against a broadly stronger greenback (Smith, 2023). The loonie traded 0.3% lower at 1.3615 to the U.S. dollar, hitting its weakest intraday level since May 31 at 1.3639. The Canadian dollar decreased by 0.5% during the past week, making it the longest losing streak since May 2022. Two main factors currently influence market dynamics, the Federal Reserve's position on interest rates and concerns about China's economic growth.
Given Canada's significant role as a commodities producer, particularly in oil, the loonie is sensitive to global economic conditions. Notably, oil prices hovered around $79 per barrel, nearly at their lowest point in a month. On the domestic front, positive data emerged with a preliminary estimate indicating a 1.4% increase in wholesale trade in July compared to June. Meanwhile, the Canadian 10-year yield remained relatively stable at around 3.69%, having retraced from a 15-year high of 3.828% seen last week.
Financial Tip of the Month:
As the new school year approaches, take the opportunity to chat with your kids about spending wisely for the new school year. Reevaluate your family budget to cover school-related expenses, from supplies to extra-curricular activities. By involving your children in financial discussions, you're not only preparing them for responsible money management but also ensuring a smooth start to the new school year without straining your family's finances.
At Alpen Investment Advisors, your trusted North Vancouver iA Investia team, we are committed to keeping our valued clients informed. We trust that you have found this market recap informative and insightful. Please do not hesitate to reach out to your dedicated North Vancouver financial advisor, jonathan@alpenia.ca for any questions about your portfolio or to help navigate the process of growing and preserving your wealth.
References:
Canada Department of Finance. “Design of the Tax-Free First Home Savings Account.” Canada.Ca, Government of Canada, 14 Feb. 2023, www.canada.ca/en/department-finance/news/2022/08/design-of-the-tax-free-first-home-savings-account.html.
Smith, Fergal. “Lacking Positive Catalysts, the CAD Falls for Sixth Week.” Reuters, Thomson Reuters, 25 Aug. 2023, www.reuters.com/markets/currencies/lacking-positive-catalysts-cad-falls-sixth-week-2023-08-25/#:~:text=TORONTO%2C%20Aug%2025%20(Reuters),based%20gains%20for%20the%20greenback.
Vishnoi, Abhishek. “Global Equities Enjoy Their Best Year-to-Date Gain since 2009.” Yahoo! Finance, Yahoo!, 1 Aug. 2023, ca.finance.yahoo.com/news/global-equities-enjoy-best-date-012800500.html.
Yahoo Finance. “CAD/USD (CADUSD=X) Interactive Chart.” Yahoo! Finance, Yahoo!, 26 Aug. 2023, ca.finance.yahoo.com/quote/CADUSD=X?p=CADUSD=X&.tsrc=fin-srch.
