Jordan Wealth Management Group - ScotiaMcLeod Truro

Our Markets:

Like every one of my clients, I was relieved to see a bottom in our markets take place this March. It still amazes me to be reminded that a stock (or bond market for that matter) are only worth what someone else is willing to pay for it on any given day. Long-term is a different story, but no one seems to want to look out that far any more. While the speed and severity of decline in values offered for everything was swift and brutal, so too was the reversal and climb back up from March to June.

I am in the camp that believes that we are now in the midst of a correction since mid June, and that this is a good thing. If our stock markets were up 40% since March to mid June, it would not be unexpected or abnormal to see the markets take back a third or a half of this gain before commencing to rise again. I believe that another rise in the markets will happen, for more than a few reasons:

1. There is still a fair bit of cash on the sidelines (some of my clients included) that will want back into the markets once there are more definite signs we are through the worst of the recession. This is the money that is not looking to shoot the lights out, but wants a decent return once the risks are lessened.

2. We will eventually see a slowing, then a reversal of the pace of job losses and decline in housing prices, particularly in the States.

In the meantime, there is plenty of reason to be pessimistic if you want to be: I am hearing more and more people make comments that reflect a view that the global economy's recovery would not be robust and quick.  Overly optimistic short- term outlooks are now being tempered.  Here in Canada recently, Finance Minister Jim Flaherty said that the Canadian economy would continue to contract for the next few months while U.S. Vice President Joe Biden admitted that they had "misread the economy”.

This has been the worst ever post-war period of job market downsizing in the US economy. Unemployment will likely reach 10% or more by the end of this summer.

Interest Rates:

We expect to see interest rates higher for all ranges of maturity a year from now. If you are using borrowed money for any purpose with an interest rate linked to prime – be careful out there! Our economists are currently forecasting that prime will be higher by 1.5% by this time next year. 

Oil Prices:

While oil prices are heading downwards at present; I still believe this will be short-lived. The world price of oil can be skewed by a little as a few million barrels of oil supply or demand either way. You should remember that China plans to create a strategic supply of 90 day oil consumption in the next few years – this additional demand can easily move prices up again. You should also remember that the number of exploratory wells being drilled is at a record low – this will result in diminished supply down the road.

 Proposed Changes to Canada Pension Plan:

You may have to plan to work another year before you retire.

On May 25, 2009 Finance Canada announced some proposed changes to how Canada Pension Plan will work. Read the announcement here.

In brief, the changes are proposed to take effect over a period of time from 2011 to 2016, this will affect anyone planning to retire after 2010.

a) Early retirement (before age 65) will result in a reduction in CPP benefits by 7.2% per year, which is up from the traditional 6%. This means that if you begin to take your pension at age 60, your payments will be cut by 36%, not 30%. To receive the same amount per year under the new formula, you will have to work till age 61 instead of age 60.

b) On the flip side of this, late retirement (after age 65 but before age 71), CPP benefits will be increased, not by 7.2% but by 8.4%, which is up from the traditional 6%. This means that if you wait until age 70 to take your CPP, the benefit payments will be 42% higher, compared to the 30% higher today.

c) If you want to begin to collect CPP while you are still working (which may happen in a recession such as this because people are having to get new employment that does not pay as much as the last job did so they need to supplement their income), then instead of having to stay out of work for 2 months like you do now, you can begin to collect CPP at age 60 even if you continue to work - AND after age 65 if you are collecting CPP but want to continue to work, the proposal is that you can contribute to CPP again through your work in order to increase your benefits.

d) The calculation for CPP will change as well - currently the lowest 7 years of earnings is deleted from the calculation - under the proposals, the lowest 8 years will be omitted so that the benefits are not weighed down by low earning years. These changes do not affect the Quebec Pension Plan. If you are not happy about this, I’d suggest you contact your MP. If you have any questions on how the proposed changes affect your personal plan you can contact us for help.