Welcome to December
As we close out the year, Canada’s financial and economic landscape provides both opportunities and threats. On the threat ledger, the challenge of US trade tariffs hangs over the export segments of manufacturing and resources. While the threat may be more of a political move than economic policy, it will tend to keep new business investment at check until it is resolved. Additionally, the unemployment rate is the highest it has been in 8 years in Canada and with the inflation rate essentially in check, expect a half point drop this week by the Bank of Canada. The Canadian dollar is getting in recent low territory and may drop further. This will pressure inflation again but will be somewhat countered by more attractive exports at the lower value CDN.
On the opportunity side of the landscape, the federal government continues to expand programs and incentives for development of real estate specifically for housing. Adding to this the mortgage rules are being relaxed somewhat encouraging more home purchases. These market influences, along with more optimism in the real estate market should provide a solid economic backdrop to the mortgage and real estate market to thrive in 2025.
Drake investments are almost all based in the Canadian real estate market and so you are well positioned to thrive in the opportunities 2025 presents. We specifically recommend MIC shares and DMI. Click here to learn more
I would like to wish you all a Merry Christmas and Happy Holidays this December. Christmas is a wonderful time of year when we celebrate the birth of Jesus in Bethlehem just over 2000 years ago. In my family, we have always had big Christmas celebrations, but it can be a difficult time for some facing financial or other challenges in their personal lives. This year let’s celebrate and spend time with family, but also look out for those who may be going through difficulties, and when we can, put our arms around them and help them get through the season.
We enjoyed our Drake Financial Staff Christmas Party at Rowena’s Inn on the River this past Friday. It is a beautiful setting on the Harrison River and we were fortunate to have live classical guitar as entertainment. As promised in the November newsletter, I include a Christmas quiz that we did at our Christmas Party. See how many you get correct. Melissa Reedel was the high score at the Drake party with 31 correct. See if you can beat it!
Financial Literacy Segment
Do you know what an FHSA is? It is a First Home Savings Account. The benefits of opening one is that you get a tax deduction similar to an RSP, you earn interest tax free while the funds are in the plan, and you can take the funds out to purchase a home without any tax consequences – like a TFSA.
Eligibility for a FHSA is that you must be a Canadian resident, between 18 and 71 years of age, you and your spouse can not have owned real estate in the past four years. The maximum contribution limit is $8,000 per year to a maximum of $40,000.
Drake Financial offers setup and administration for FHSA accounts and our MIC shares and DMI investments are FHSA eligible. If you want to learn more or set up an FHSA account contact us.
Investor Insights – December 2024
As we close out the year, Canada’s financial landscape offers both challenges and opportunities. Here’s a concise summary of key developments to inform your investment decisions:
Economic Overview
• Inflation and Interest Rates: Inflation has stabilized at 2%, and the Bank of Canada has cut interest rates four times this year, fostering a more favorable borrowing environment. These conditions have boosted market optimism but could pressure the Canadian dollar and export competitiveness .
• Tax Breaks: The federal government introduced a temporary tax break on groceries and essentials, easing household expenses. This could positively impact consumer spending, especially in retail and food sectors .
Housing Market Updates
• Mortgage Reforms: New policies allow mortgage holders to switch lenders without requalification and extend amortization periods to 30 years for insured loans. These reforms aim to boost homeownership, which could benefit construction and real estate stocks .
• Rental Market Intervention: A $50 million Short-Term Rental Enforcement Fund aims to address housing supply issues by regulating non-compliant short-term rentals. This policy might stabilize rental yields and housing prices in urban centers .
Key Sectors to Watch
1. Real Estate and Construction: The government’s ambitious goal of building 4 million homes presents opportunities in housing development, materials, and infrastructure.
2. Retail: With temporary tax breaks and holiday spending, retail stocks may see gains, particularly in essentials and discretionary items.
3. Energy: Ongoing trade tensions with the U.S. around tariffs and climate challenges in hydropower could create volatility in the energy sector .
Global Trade Risks
• The U.S. president-elect has proposed tariffs on Canadian exports, potentially affecting the energy, agriculture, and manufacturing sectors. Investors should monitor developments in trade policies closely .
Strategic Takeaways
• Short-Term Focus: Leverage the holiday-driven consumer spending boost in retail and hospitality.
• Long-Term Growth: Consider real estate and infrastructure investments tied to housing initiatives.
• Risk Mitigation: Diversify portfolios to hedge against potential trade disruptions with the U.S.
Wishing you a prosperous end to 2024 and a strong start to 2025! For personalized insights, consult us anytime.