The Canadian economy and Canadian stock markets have taken it on the chin thanks to the pandemic. Canadian stocks have lagged US stocks. But some market prognosticators feel that better days and months are ahead for the Canadian economy and Canadian stock markets. While Canada is in the midst of a troubling COVID wave, we are certainly in much better shape than the US and Europe. Also, Canada leads the pack with respect to pre-bought vaccines from Pfizer and Moderna. The Canadian comeback may be in play.
Of course, Pfizer and Moderna have released more than promising vaccine results, showing 95% effectiveness. The more than promising vaccine news was the lead headline once again for my weekly MoneySense column. Here’s Making Sense of the Markets. I also look at the incredible surge of bitcoin, and Tesla finds a parking spot in the S&P 500.
Canada makes the right call on vaccines.
Canada was out in front arranging for pre orders of vaccines. From the Globe and Mail …
Canada was among the countries that moved quickly to ink deals for some of the leading vaccine candidates, based on recommendations from a federally appointed task force. So far, it looks like those bets are paying off. Canada has a lock on 20 million doses of vaccine produced jointly by Pfizer Inc. and Germany’s BioNtech.
Moderna’s vaccine is also destined for Canada with an order of up to 56 million doses. The two orders combined are enough to vaccinate every Canadian with the required two doses.Globe and Mail
A recent poll showed that 72% of Canadians are willing to get the shots. The highest acceptance level was in BC at 77% and lowest in Saskatchewan at 58%.
The logistics of distributing and tracking the vaccine recipients will be a great challenge. Most of what I’ve read suggests that most Canadians (who want the vaccine) might have that opportunity in the Spring and Summer of 2021. Those who are at greatest risk might see the vaccines available early in 2021.
It’s quite possible that with COVID more under control in Canada as a starting point, and the ability to ‘quickly’ vaccinate most of the population, we might get to the other side of the pandemic much soon than was expected a few months ago. A population that has the ability to move about more freely can certainly generate much greater (and more widespread) economic activity and growth.
While getting to the ‘other side’ might take a while, let’s hope that we make great strides in 2021.
Canadian stocks to soar in 2021?
Brian Belski, chief investment strategist of BMO, feels the TSX will post double-digit gains to hit a record 19,500 by the end of 2021 as the bull market roars back to life.
As investors continue to deal with the unprecedented nature of 2020 and challenges that remain for 2021, Canada is likely to march toward a new all-time price high according to our models,” he wrote.
Belski sees the S&P 500 gaining 15% from its 2020 year-end target of 3,650 to reach 4,200 by the end of 2021. The TSX closed at 16,909.81 last night and the S&P 500 at 3,581.87.
For Canadian markets, that’s also a 15% increase from the current level. Mr. Belski had also clarified the estimate is based on good news on the vaccine and pandemic front
The Canadian banks are on the march.
Share prices of Canadian banks are on the rise. And bank analysts suggest that a steepening yield curve will be good for Canadian banks. A steepening yield curve occurs when the spread between shorter term bonds (1-2 years for example) and longer term bonds widens. We’ve recently seen longer term rates increase as shorter term yields hold steady.
Canada’s big banks have increased an average of 15% from the beginning of November. That outpaces the returns of the US and Canadian stock markets.
By one rough measure of sensitivity to the yield curve, Royal Bank of Canada expects its profits will rise by $479-million for every 100-basis-point increase in the yield curve.Globe and Mail
We had discussed investing in Canadian banks in mid September. That post outlined how the banks might have represented great value at that time. I also covered that same topic on Million Dollar Journey.
TFSA annual and life contribution limits.
The TFSA new contribution limit for 2021 has been officially released. That limit is $6,000, matching the amount set in 2019 and 2020.
With this TFSA dollar limit announcement, the total contribution room available in 2021 for someone who has never contributed and has been eligible for the TFSA since its introduction in 2009 is $75,500.
Federal tax bracket thresholds for 2021.
- The 33.0% tax rate begins at taxable income of over $216,511, up from $214,368 in 2020.
- The 29.0% tax rate begins at taxable income of over $151,978, up from $150,473 in 2020.
- The 26.0% tax rate begins at taxable income of over $98,040, up from $97,069 in 2020.
- The 20.5% tax rate begins at taxable income of over $49,020, up from $48,535 in 2020.
- Income below $49,020 is taxed at 15.0%.
The basic personal amount for 2021 is $13,808 for taxpayers with net income of $151,978 or less. At income levels above $151,978, the basic personal amount is gradually clawed back until it reaches $12,421 for net income of $216,511.
You can check your Province’s income tax rates thanks to tax brackets for Canadians – on MoneySense.
ETFs are winning in 2020.
Mutual fund sales in Canada outsold ETFs in October. But ETFs are winning the day in 2020. For October mutual funds brought in $3.4 billion.
From Advisor’s Edge …
ETFs saw more than $1.9 billion in monthly net sales, up from $699 million in September but down notably from October 2019 — when monthly net sales were almost $3.9 billion.
ETFs have typically had the upper hand over mutual funds in sales this year. Including October’s results, ETF sales for the year to date are $34.4 billion, almost double the mutual fund total of $17.4 billion.
We’re winning the low fee fight today, while there’s still $1.6 trillion in Canadian mutual funds. But as Jonathan Chevreau reminds us not all mutual funds are bad. Just most of them, ha. 🙂
You might also check out the Tangerine Portfolios. They offer index-based Robo-like mutual funds. And yes, Tangerine ETFs are on now on display. Stay tuned for that post.
More Weekend Reads.
On findependencehub Robb Engen shows when most Canadians start taking CPP.
You’ll find a host of great reads on My Own Advisor.
And on Retirement Manifesto let’s go on a trip with Fritz – A Drive Across America.
Here’s a wonderful personal portfolio update on The Dividend Guy.
On Stocktrades Dan Kent outlines how to buy stocks in Canada.
On lowestrates.ca (something I’m more than interested in) the ways to tap the equity in your home.
On Savvy New Canadians Enoch has a look at iShares one ticket XGRO.
More brain food.
Morgan Housel is a great writer and a great thinker. Do yourself a favour and read this once or twice and take it all in. So many great insights.
Nothing separates us from human beings in earlier eras than how much less disease affects us. If we moderns lived for one year with the sort of death rates our pre–industrial age ancestors perpetually lived with, we’d be in societal shock.
On Mauldin Economics – The Great Reset vs The Great Reset.
I previously expected we would get through to at least the late 2020s before hitting the debt wall. Now, I’m not so sure. This pandemic and recession may push us there faster because they are making the debt grow faster.
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Check out EQ Bank for those who want to make their cash work a lot harder. The current high interest savings account rate is 1.5%. They also offer generous rates for GICs. I opened an account, it was very easy and seamless.
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