The expected global economic growth will improve moderately in 2013, but the overall growth rate will remain low. While there remains to be challenges in the Euro-zone it is surviving. The European Central Bank has drawn a line in the sand and authorities are working hard to fix the problems. In general terms emerging markets will continue to be stronger than traditional developed markets. China’s economy had a slowdown that seems to have bottomed, and its economy is starting to grow at a more moderate pace than observed during the 2009 recovery.
Growth in the U.S. is likely to be modest in the first two quarters as it addresses these fiscal issues, but should pick up in the second half of 2013. We continue to be heartened by the recovering housing sector and believe that the U.S.’s increasing energy self sufficiency will also
be a boon for the economy.
Growth in Canada will be slower than U.S. due to high level of consumer debts and corrections in the housing market to more sustainable levels. Canadian earnings are expected to grow only around 2% this year. Little earnings growth is expected from the Financial and Energy sectors.
Highlights
Fixed Income Versus Equity: While continuing to play a role, the forces identified as contributing to lower bond yields will gradually diminish over the coming year. Structural economic forces are slowly changing and relative valuation now favours equities over bonds.
Equity: Equities remain undervalued despite improving fundamentals. Positive earnings growth globally is expected with the strongest performance from the U.S. and Asia. Corporate entities continue to hold record levels of cash in their balance sheets and economic optimism could lead to a cycle of take-overs.
Fixed Income: In developed markets yields remain at historical lows given central bank intervention and ongoing austerity measures. More potential exists in emerging market and corporate pieces.
Commodities: As a result of lower levels of economic growth, near-term demand for commodities is likely to be muted—particularly in China, which has been a major commodity consumer. Gold is expected to continue to provide a hedge against the risk of extreme market
or economic outcomes.
Currency Markets: The competitive advantages that drove up the Canadian dollar over the past decade have been fully priced into its value,
and the Canadian dollar is believed to be currently fairly valued against the U.S. dollar. Supported by Canada’s fiscal strength, the dollar
should continue to trade within a close-to-par range with its U.S. counterpart.
RRSP and TFSA
The RRSP season is upon us once again. March 1st, 2013 is the deadline for making contributions for the 2012 tax year. Please note that your RRSP contribution limit should be on last year’s Notice of Assessment or 18% of last year’s earned income up to a maximum
contribution of $22,970 plus unused carry forward amount. We can help you to determine the amount that matches the estimated 2012 tax refund based on what you have already contributed to top up your RRSP. We can also help you to secure any RRSP loan either for topping up or a specific amount that you may need, subject to credit approval.
With the start of a new year, the $5,500 contribution limit for Tax-Free Savings Account (TFSA) for 2013 is now available. You can contribute up to $5,500 for 2013 and any unused contribution room since 2009. Generally, you can hold the same types of investments as those permitted in a RRSP. Neither income earned in, nor funds withdrawn from a TFSA will affect your income-based benefits and tax credits. It is a great way to save tax-free.