Blog - Frost Wealth Management

Newsletter & Updates

Welcome to 2020!

 

First of all, I would like to express my gratitude to all of you for your continued confidence in the ability of the Frost Wealth Management Team to be the steward of your capital.

Our overall principal of investment advice is always goal-focused and planning-driven. This is in contrast to common approaches that are market-focused and driven by current events.

Long-term investment success comes from continually acting on a plan. Investment failure often results from reacting to current events in the economy and the markets.

You and I are long-term equity investors, working steadily toward the achievement of most cherished lifetime goals. We make no attempt to forecast-- much less time-- the equity market. Indeed, we believe this to be a fool's errand.

 

More thoughts from Greg

 

2019 Recap

 

 

2019 was practically a mirror-image of 2018

 

The previous year, we saw a dramatic 19.8% peak-to-trough decline through Christmas Eve 2018.

This past year, we saw the exact opposite with an exceptionally good year for the market. Even though the economy slowed somewhat, manufacturing went into decline and the earnings of the S&P 500 ended 2019 down slightly year-over-year.

 

Read the whole post

 

2020 Outlook

 

 

Stay the course

 

A good portion of my time is spent in research.
All of my current reading and past experience suggest to me that meaningful market setbacks have not historically occurred during huge waves of public pessimism and fear-- quite the contrary.

This is not intended as a market forecast.
It is simply an invitation, as we look to the new year, to take some comfort from the rampant fear abroad in the land. Even after a decade or more of stellar returns-- let's hold off on the worrying. That is, until the stock market has become cocktail party conversation, your Uber driver starts giving stock recommendations and everyone around us gets excitedly bullish.

It is quite possible 2020 will not be as good for returns as 2019 has been. The fact-- or the truth-- is that those of us who are goal-focused, planning-driven investors enjoyed an exceptional year in 2019. We did so-- not by forecasting, nor jumping in and out of markets, but by patiently hewing to our long-term, balanced portfolios.

That is the lesson that I will carry into 2020.

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Every December, in lieu of Christmas cards, the Frost Wealth Management team invites clients to take advantage of our Charitable Giving Fund. 

To date, our clients have donated $20,908 to their favourite charity-- and we have matched it. The information is on our website under "Beliefs & Values>Charitable Giving" 365 days of the year. In truth, we would love to give even more, so I decided to make this the focus of my December blog post. 

 

We all have causes that are near and dear to us. What’s important to you, is important to us. Many of you already give at the holidays (and throughout the year). Why not let us add to that generosity?
 

When you donate to your favourite organization, we will match up to $50 per client.
It’s easy to do:

  1. Print and complete the attached Contribution Form below
  2. Return it to us by December 13th (email, regular post or even call it in)
  3. Enclose the cheque made payable to the charity of your choice, or a copy of your donation receipt
  4. We will match your donation (up to $50 per client) and submit everything to your charity in time for this year’s tax receipt.

$41,815

That's how much we have given over the years.

 

For 2019, we would love our Charitable Giving total to hit

$50,000

 

Let's do this! 

Charitable Giving Form

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Recently, I attended the iA Securities Advisor Summit in Quebec City.

While there were many fascinating topics and speakers, I would like to share highlights from Clement Gignac's presentation. Clement is Senior Vice-President and Chief Economist at our parent company iA Financial Group.

Summarized from Clement Gignac’s presentation on September 23, 2019 at the iAS Advisor Summit:

 

  • We are currently experiencing the longest bull market in history, but bull markets do not die of old age
  • The service sector is resilient however, the manufacturing sector is slowing down
  • ISM Manufacturing Index is at 50, signalling a slowdown, which is confirmed by a CEO survey indicating that 60-70% expect a slowdown
  • GDP expected to end at 2.9%, down from 3.6% in 2018
  • Policy mistakes or external market shocks could jeopardize business cycle
  • Financial markets are very sensitive to trade settlements developing in USA
  • Global trade contraction outside of recession is a first, due to the rise in protectionism
  • Analysts are not calling a recession yet, however, if USA imposes additional tariffs in December, this will have a significant impact
  • Historically, a US president has never been re-elected in a recession. The emphasis will be on President Trump to get changes enacted before additional tariffs are enacted in mid-December
  • The labour market is posting its best results in 16 years
  • Canada has the highest immigration growth of the OECD countries and the highest level of education with 65% of immigrants aged 25-45 having post-secondary education
  • Fair value of the Canadian dollar is closer to 80 cents
  • Bond yields are very low. Global bond yields have hit a record low. There are now 14 trillion bonds in the world with negative interest rates—this means that citizens are financing government funds to borrow from them

International perspectives—bottom line

 

Risk factors:

 

  • The trade relationship between China and the US remains tense and brings significant uncertainty to global supply chains
  • The weakness of manufacturing activity could lead to larger global economic downturn, especially in Europe with Germany
  • Geopolitical risks remain high (tensions in the middle east)
  • Political uncertainty around Brexit

Positive elements:

  • The US consumer remains confident and has an adequate level of savings
  • China is using its fiscal policy in a recession scenario
  • Germany is open to using its fiscal policy in a recession scenario
  • Many central banks are now pointing to further monetary easing

 

 

This information has been prepared by Greg Frost who is an Investment Advisor for HollisWealth®. Opinions expressed in this article are those of the Investment Advisor only and do not necessarily reflect those of HollisWealth. HollisWealth® is a division of Industrial Alliance Securities Inc., a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada.

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One of the biggest challenges that many investors face, is understanding the reports and statements that update your portfolio's performance. There are just so many different ways of reporting and so many different numbers. How do you know how your money is really doing?

With the changeable nature of financial markets, there are always going to be peaks and valleys along the way. What is important to know, is how much money you put in (invested capital) and where you are now (market value). So why do so many statements list book value? What is it-- and why do I need to know?

I recently discovered this great 5 minute video from Edgepoint that clarifies the confusion. With their permission, I have shared the link below:

 

Decoding your investment returns 

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Tax Highlights from the 2019 Federal Budget

Reprinted with permission from CI Investments

 

On March 19, 2019, federal Finance Minister Bill Morneau tabled the Liberal government’s highly anticipated budget – the final one before the October 2019 election.

After accounting for Budget 2019 proposals, the budgetary balance is expected to show deficits of $14.9 billion in 2018-2019 and $19.8 billion in 2019-2020. Over the remainder of the forecast horizon, deficits are expected to decline gradually from $19.7 billion in 2020-2021 to $9.8 billion in 2023-2024. The federal debt-to-GDP ratio is also expected to decline every year over the forecast horizon, reaching 28.6% by 2023–2024.

Budgetary revenues are expected to increase by 6.7% in 2018-2019. Over the remainder of the forecast horizon, revenues are projected to grow at an average annual rate of 3.5%, in line with projected growth in nominal GDP.

There were no changes to personal or corporate income tax rates.

The following is a summary of tax changes announced in the budget. Please note that these changes are proposals until passed into law by the federal government.

 

Read the article

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For this post, I'd like to share some invaluable insights into events that impacted financial markets in 2018 and how things are looking for the year ahead.

 

This commentary comes from IA Financial Group's Senior Vice President and Chief Economist, Clement Gignac:

 

Special edition:

 

After the worst performance in 10 years, the stock market should perform well in 2019

 

Economically speaking, 2018 was marked by continued economic expansion south of the border for a ninth consecutive year. GDP growth was nearly 3% and the unemployment rate is at its lowest in almost 50 years.  

However, the year was markedly less favourable for financial markets. Despite an exceptional rise in U.S.

business profits, the Fed’s decision to continue normalizing its monetary policy and the escalation in U.S.‐China trade tensions have created a highly volatile environment on Wall Street. In fact, there were more than 80 sessions showing daily fluctuations exceeding 1% compared to barely eight in 2017. The risk premium on corporate bonds also increased substantially last quarter from an unusually low level.

 

Read more...

 

Watch the video on Facebook

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2018 Review

Investors are having a hard time adjusting to central bank tightening, trade war rhetoric, and a global growth slowdown. This has led to sharp valuation compression. Almost 90% of all global asset classes have generated negative returns, the highest proportion recorded in over a century. Meanwhile, cash is outperforming global equities and bonds for the first time since 1994. So, it seems fair to say that 2018 has been a tough year.

 

2019 Outlook

 

If excessive monetary tightening, escalating trade wars and a growth slump form the basis for worry, then the investment outlook for 2019 is beginning to brighten:

§ U.S. monetary authorities have signaled that they will slow their pace of tightening, while other major central banks push out the date for when they might start their respective tightening cycles;

§ The Sino-U.S. trade war appears to be de-escalating, the USMCA has been signed and the largest bilateral trade deal in history, between the EU and Japan, goes into effect March 2019;

§ A global recession seems unlikely over the next year. Ongoing growth will be aided, in large part, by the world’s two largest economies - U.S. and China.

 

The Big Picture

A look back at 2018 and outlook for 2019

 

Clement Gignac, Senior VP, Chief Economist

iA Financial Group

 

According to Deutsche Bank, close to 90% of combined bonds, equities and commodities indices are posting a negative YTD return. A first since 1901...

 

Read the full article

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