HAPPY NEW YEAR!


We are very pleased to send you our monthly financial newsletter to keep you abreast of financial markets and world economy. We hope that you will enjoy reading these articles. As always, we welcome your comments and questions.


Sincerely,

 

Team Beauregard Farina Tourangeau

1250 boul. René-Lévesque West

Suite 1500

Montréal, QC

H3B 4W8

Market Returns
              

Value as of

Dec. 31 2015*

2015

Year to date

2014

S&P / TSX

13,010

-11.1 %

7.4 %

S&P 500

2,044

-0.7 %

11.4 %

Euro Stoxx 50 

3,268

3.8 %

1.2 %

MCSI emerging markets

794

-17.0 %

-4.6 %

Oil ($US/Barrel)

$ 37.04

-38.8 %

-41.6 %

Gold ($US/oz)

$ 1,060

-10.8 %

-1.9 %

$CAD / $USD

$ 0.72

-16.5 %

-8.5 %

Source : Bloomberg, Richardson GMP Limited

*Values are in local currency

Investment Strategies  

2016 investing review
What will happen in the markets in 2016, and how do you optimize portfolios for those conditions? As slow global growth continues, the question on many people's minds is: Are we on the brink of a worldwide recession? That's the pivotal question heading into 2016.

The difference in valuation between growth and value style is as high as it was in the [dot-com] bubble back in 2000. Growth has outperformed value the last nine years, which is unprecedented. But, in the long term, statistics show value investing outperforms 56% of the time and a rise in rates tends to favour value.

The downdraft in the stock market wasn't met with a rise in prices in the bond market of the same order of magnitude. So you have the volatility in the stock market, and the bond market may not continue to provide that normal diversifier that people had gotten used to in the aftermath of the financial crisis.
  
Tax & Estate Planning Strategies 
 
TFSA back to $5,500 as of 2016
It's official. The $10,000 TFSA limit is rolling back to $5,500. The change is effective January 1, 2016, so clients will not be affected for 2015.
 
In the news                                     

BoC watching bond market liquidity
The Bank of Canada is keeping an eye on liquidity in fixed-income markets, identifying it as a vulnerability to the Canadian financial system. The BoC identified excessive risk-taking as a vulnerability given strong issuance of high-yield bonds, low corporate spreads and high valuations in equity markets. And now, "Given the new regulatory architecture, we may not know just how resilient market liquidity is until there's a true stress event.

Some of the watchers will be surprised that this new risk was highlighted by the Bank of Canada, because not a lot of people were expecting them to add it as third major vulnerability. The FSR report said the increased potential "for market liquidity to evaporate is a worry for investors and issuers, as well as a systemic concern. A sudden decline in market liquidity could exacerbate price changes and increase volatility, especially if many investors tried to unwind their positions in the same manner at the same time.
  
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What the Fed's move means for investors
Today's rate hike, in and of itself, is no game changer for equity markets. Markets had priced in Yellen's move, which was clearly telegraphed well in advance." And Fed policy is still extraordinarily accommodative. The Fed funds rate is well below what anyone would expect in the context of an economic expansion that started seven years ago.

Today's move should not be viewed as a headwind for equities. The equity outlook is going to be determined by many more things besides the Fed. You have commodity prices, the earnings outlook, company-specific issues, growth in China, and so many other issues. These things are not going to immediately shift based on one hike.

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Business cycle will drive equity valuations in 2016
The business cycle will be crucial for further gains in risk assets next year, now that the global tide of easy money that inflated valuations in recent years has crested. With valuations no longer cheap and corporate profit margins under pressure in many markets, economic growth is needed to boost revenues.

Valuations appear to have leapt ahead of the business cycle in many markets, especially in the U.S. The outlook is made even more challenging because long-term trends such as aging populations, high debt loads and technological change are intersecting with short-term cycles, meaning that the high growth rates of the past may not return. 
 
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Eddy Farina, Fin. Pl., CIM
®
Senior Vice President, Investment Advisor
514.981.5727
 

"  An investment in knowledge pays the best interest "
 
- Benjamin Franklin


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DISCLAIMER

The opinions expressed in this report are the opinions of the author and readers should not assume they reflect the opinions or recommendations of Richardson GMP Limited or its affiliates. Assumptions, opinions and estimates constitute the author's judgment as of the date of this material and are subject to change without notice. We do not warrant the completeness or accuracy of this material, and it should not be relied upon as such. Before acting on any recommendation, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. Past performance is not indicative of future results. The comments contained herein are general in nature and are not intended to be, nor should be construed to be, legal or tax advice to any particular individual. Accordingly, individuals should consult their own legal or tax advisors for advice with respect to the tax consequences to them, having regard to their own particular circumstances. Insurance services are offered through Richardson GMP Insurance Services Limited in BC, AB, SK, MB, NWT, ON, QC,NB,NS,PEI and NL. Additional administrative support and policy management are provided by PPI Partners. Richardson GMP Limited is a member of Canadian Investor Protection Fund. Richardson is a trade-mark of James Richardson & Sons Limited. GMP is a registered trade-mark of GMP Securities L.P. Both used under license by Richardson GMP Limited.