Dear Valued Client,
Aloni Goh Wealth Strategy Notes:
With the major market indices in North America all climbing, all eyes will be on the central banks in March. All of the major banks – the U.S. Federal Reserve, Bank of Canada, Bank of England, Bank of Japan, the Reserve Bank of Australia and the European Central Bank – left rates unchanged in January. Fed chair Jerome Powell is expected to testify before the House and the Senate committees from March 6-7, while the Bank of Canada is expected to make an announcement on interest rates on March 6.
Why is this important? Because rate cuts were, and continue to be, expected in 2024. The doves – those who want lower interest rates to encourage borrowing and spending – have been forced to dial back their expectations of rate cuts, at least until the summer. According to Morningstar’s gauge on market sentiment regarding interest rates, they suggest the following:
- a 16% chance of a 0.25% drop in interest rates in Canada in March 2024,
- a 96% chance of a 0.25% drop by June 2024,
- a 94% chance of a 0.50% drop by September 2024 and
- an 80% chance of a 1.50% drop by June 2025.
The expectations surrounding the anticipated interest rate cuts have helped markets climb. Keep in mind the markets are a leading indicator; they are reflections of what we think the future may look like, whether it’s a stronger economy, more clean energy or increasingly advanced AI. Markets are fueled by speculation, and the vast majority of retail investors – those who dabble or attempt to become day traders through their online brokerage – do not fully understand the risks.
From our perspective, while interest rates are important, we remain steadfast investing in more predictable assets, including dividend-paying blue-chip stocks and fixed income. When markets run too hot and inevitably correct, or when markets are down and unable to climb back up, our portfolios will generate income for you.
Be patient, and borrowing from the wise words of Spock, we leave you with a modified Vulcan salute: “Stay long and prosper.”
Further Reading:
With RRSP season in the books, it’s time to turn our attention to your TFSA’s.
A reminder TFSA contributions for 2024 can be made at any time this year. The TFSA contribution limit for 2024 is $7,000.
An individual who was 18 years or older in 2009 and has never contributed to their TFSA can contribute a maximum of $95,000 as of 2024. Unused TFSA contribution room rolls over from year to year. TFSA contributions are not tax-deductible because withdrawals are tax-free.
Please note withdrawing funds from your TFSA does not reduce the total amount of contributions you have already made for the year. Withdrawals, excluding qualifying transfers and specified distributions, made from your TFSA in the year will only be added back to your TFSA contribution room at the beginning of the following year.
From Fidelity Investments, see the difference a TFSA can make:
Assumptions: Rate of return of 6%, marginal tax rate of 50% for interest and 25% for capital gains, distributions reinvested, distribution yield of 2.0%, distribution composed of 50% interest and 50% capital gain, initial contribution of $6,000 and contributions increase in $500 increments based on a 2% inflation rate. Contributions were made at the beginning of the period. Unrealized capital gains were taxed at the end of the holding period. This assumption ignores contributions from prior years.
If you are interested in speaking with Aloni Goh Wealth Management regarding your current financial situation, or perhaps know someone who we may assist, we would be pleased to help. Referral of friends and family is the greatest compliment you could give us.
Please visit us at alonigohwealth.com or contact call us by phone 604-658-3056 or email raloni@leedejonesgable.com.
Best Regards,
Ron Aloni / Alan Goh / Jason Chen
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This commentary is intended for information purposes only and does not constitute an offer to buy or sell our products or services nor is it intended as investment and/or financial advice on any subject matter and is provided for your information only. Every effort has been made to ensure the accuracy of its contents. The views contained herein do not necessarily constitute the views of Leede Jones Gable Inc. Leede Jones Gable Inc. is licensed as an investment dealer in every Canadian Province and Territory and is a member of the Canadian Investment Regulatory Organization and the Canadian Investor Protection Fund.
