Summer 2021 Newsletter
As the economy recovers, staying the course is more important than ever
You have probably heard that when times are tough – like a recession or market correction – that’s it’s wise to “stay the course.” Ironically, with a recovering economy and robust investment markets, this advice bears repeating. Here’s why.
Money to Spend
A forecast from the Conference Board of Canada in March noted that Canadians saved almost 15% of their income last year, the highest rate in 35 years. That’s an average of $5,000 per person. The Board predicts that consumers will be spending big, driving the economy to grow by 5.8% in 2021. In April, the Bank of Canada said households look intent on spending some of the billions built up during the pandemic either because they cancelled purchases or had no place to spend the money.
The overheated housing market suggests Canadians are spending here too. Prices have increased more in Canada than in any other G7 country, with the national average home price reaching a record $716,828 in March, up 31.6% from the same month last year.
Some are predicting another “Roaring Twenties” with consumers spending freely – even recklessly – as we celebrate the end of pandemic restrictions. At times like this, it’s easy to be blown off course on the way towards your long-term goals, like a successful retirement. What to do? Keep these key principles in mind:
1. Keep investing. No one would begrudge Canadians some enjoyment spending after last year but stay committed to your future too. Keep up or begin a regular investment program so that some of your discretionary income is always earmarked for a future that will come, come what may.
2. Take a portfolio approach. If the markets continue at their current pace, the temptation of exotic investments is likely to increase. The run-up in cryptocurrencies and the GameStop fiasco suggest some investors have become less fearful, even complacent about their money. Staying true to a well-constructed, diversified portfolio aligned to your goals and risk tolerance provides a bulwark against fads, impulsive actions, and herd mentality.
3. Build resilience. “This too shall pass” is a great mantra in both bad times and good. A prolonged expansion can lead us to forget about the tough times and ignore some of our safeguards, like an emergency fund or our insurance coverage. Keeping these safety nets in place and strong while we can will prepare us for the next financial challenge we’ll face.
Value of advice
Studies have shown that one of best defences against investor behaviour that destroys wealth is having an advisor. Handholding, providing perspective, reminders about your plan and goals are all as important as the investment work we do. Let us help you be successful today and tomorrow.
Headline versus core inflation: which really matters?
There are two key measures of inflation: headline inflation and core inflation. This year, headline inflation has dominated the headlines, but which is the most important for investors?
Headline inflation. Headline inflation is a kind of “raw” inflation figure reported through the Consumer Price Index (CPI) as measured by Statistics Canada. The index measures the cost to purchase a fixed basket of goods. The basket contains quantities of specific goods and services, weighted according to how much consumers buy on average. Headline inflation is a way of determining how much inflation is occurring in the broad economy, and as it’s related to changes in the cost of living, it provides information of most interest to consumers. The CPI is also the measure of inflation that the Bank of Canada uses in its inflation targeting, with a goal of keeping inflation at or near 2%.
Core inflation. Core inflation removes the index components that can exhibit large amounts of volatility from month to month, such as the price of food and energy, which may distort the headline figure. These distortions may not be indicative of the underlying or ongoing inflation pressures in an economy. For instance, a crop failure or poor weather may cause shortages and a short-term spike in food prices. Without these distortions, core inflation provides a better indicator of the direction of inflation in an economy and serves as an important measure for investment managers and investors to understand how inflation may affect markets going forward.
This newsletter has been written (unless otherwise indicated) and produced by Jackson Advisor Marketing. © 2021 Jackson Advisor Marketing.
This newsletter is copyright; its reproduction in whole or in part by any means without the written consent of the copyright owner is forbidden.
This is not an official publication of iA Private Wealth and the information in this newsletter does not necessarily reflect the opinion of
iA Private Wealth Inc. The information and opinions contained in this newsletter are obtained from various sources and believed to be reliable,
but their accuracy or reliability cannot be guaranteed. The opinions expressed are based on an analysis and interpretation dating from the
type of publication and are subject to change. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities
mentioned. The information contained herein may not apply to all types of investors. Readers are urged to obtain professional advice before
acting on the basis of material contained in this newsletter.
Mutual funds are not guaranteed and information on returns is based on past performance which may not reflect future performance.
Mutual funds may be associated with commissions, trailer fees, management fees and other expenses. Please read the prospectus. Important
information regarding mutual funds may be found in the simplified prospectus. To obtain a copy, please contact your Investment Advisor.
iA Private Wealth is a trademark and business name under which iA Private Wealth Inc. operates. iA Private Wealth Inc. is a member of
the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. Only products and services offered
through iA Private Wealth Inc. are covered by the Canadian Investment Protection Fund.
Posted In: PostsNewsletter