This time of year, everyone seems to reflect on the past calendar and frame it in a list: the top ten best books of the year, five most influential people of 2016, and the like. Given that 2016 was a year of headlines, I thought it would be perfect to provide some of the more explosive data points at the end of this note, but for the year ahead, here is the news.
Looking forward, the Canadian economy is still a bit fragile, with the Bank of Canada poised to lower rates again, if they need to. The tough decision to do so would have to account for the rising interest rates in the U.S., and relatively strong economic growth of the world’s largest country by Gross Domestic Product (GDP) and our largest trading partner to the south. You may have appreciated the recent lower prices at the grocery store but it’s the 2% decline in manufacturing in October that is of concern. (Source: CIBC World Markets) Broadly speaking, Canadian economic growth has softened recently but with oil prices stabilizing, a low Canadian dollar, and reasonably good employment figures, Mr. Poloz will have to weigh the likelihood of time doing the work for him rather than risk lowering interest rates and continuing to inflate the housing market. For snowbirds, that isn’t great news in the near-term as the Canadian dollar will likely remain soft until more jobs are seen in the western oil region and other signs of economic prosperity.
In the coming year, we are expecting oil prices to continue to reflect stability as the Organization of Petroleum Exporting Countries (OPEC) and other countries commit to cutting oil production, when balanced against the continuously increasing world demand, may push the price of the commodity higher.
Coupled with that, the growth in China is encouraging. Rather than looking at their official GDP, I prefer the measure of electricity use, shipping and a conglomeration of other metrics. By that standard, it appears that their economic growth has turned a corner and is edging up again. China’s growth has been a main driver for commodity prices in the past and may push them up again off of the low levels that we’ve seen over the last couple of years. India is another country with a mass population to keep an eye on as they demonetize the old currency and work to bring former black market economic activity to above table, tax paying business transactions.
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- As of November 30, each of the four core portfolios beat their year-to-date benchmarks by the following percentages (See links below for each strategy and their returns).
- Smart Income 5.73% for total 11-month return of 11.75%.
- Balanced Approach: 6.79% for a total 11-month return of 15.74%.
- Progressive Growth: 5.26% for a total 11-month return of 14.26%.
- Advanced Growth: 1.85% for total 11-month return of 12.34%.
- Global bonds ended a 25-year rise with a record monthly loss of 4% in November due to anticipation of interest rates beginning to rise.*
- Confidence in U.S. homebuilders surges to an 11-year high on expectations of lower regulations under a Trump administration.*
- The anticipated spending and tax cuts under the U.S. President-elect election platform fueled the Dow Jones Industrial Average stock index to break its own record 43 times.*
- On December 15, U.S. market cap (which measures the size of the market) was 38% of the world’s total.*
- S. Federal Reserve Board increased interest rates for the second time since 2008 in December.*
- China made more acquisitions in the U.S. and Europe than in the previous three years combined.*
- Organization of Petroleum Exporting Countries (OPEC) pumped a record 34.16 million barrels of oil per day in November, the same month that they began reorganizing to limit production.*
- The largest volumes of gold traded hands on November 9, after Trump’s election, as investors sought havens.*
- The British pound and the Mexican peso were the worst performing currencies against the U.S. dollar worldwide.*
- Warren Buffett’s wealth increase by $12 billion dollars.*
- After Brexit, the British pound slid the largest amount on record against the U.S. dollar.*
*Bloomberg, December 2016