{"id":816,"date":"2016-01-12T14:03:04","date_gmt":"2016-01-12T14:03:04","guid":{"rendered":"http:\/\/wdsinvest.com\/?page_id=816"},"modified":"2017-01-23T21:55:36","modified_gmt":"2017-01-23T21:55:36","slug":"stock-market-falling-recovering-and-rising","status":"publish","type":"page","link":"https:\/\/wdsinvest.com\/fr\/wds-resources\/quarterly-exchange\/stock-market-falling-recovering-and-rising\/","title":{"rendered":"Stock market: falling, recovering, and rising"},"content":{"rendered":"
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October 2013<\/p>\n

In this edition\u2026<\/strong><\/h1>\n

Stock market: falling, recovering, and rising<\/a><\/h1>\n

RESULTS at a glance<\/a><\/h1>\n

Ask & Answer \u2013 RESPs: Can I avoid the 20% RESP withdrawal penalty?<\/a><\/h1>\n

WDS Reads \u2013 The Instant Economist by Timothy Taylor<\/a><\/h1>\n

Did You Know? CIPF: Here's One Aspect of Investing You Don't Have to Worry About<\/a><\/h1>\n\t\t<\/div>\n\t<\/div>\n<\/div><\/div><\/div><\/div>
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Stock market:<\/span>
falling, recovering, and rising<\/span><\/p>\n\n

Investors know that stock prices ebb and flow daily, depending on the information that's circulating in the markets at any given time. Portfolios experience good runs, where values rise for an extended period of time, and bad runs, where values fall significantly. In between is the land of recovery<\/em>, where the value is above the most recent low point, but not yet above the most recent high point.<\/p>\n\n

September 2013 marked the fifth anniversary of the Lehman Brothers collapse, which sparked the onset of the financial crisis and the subsequent meltdown in global markets. Still, our economic landscape is the view we see as we travel along the road to recovery, often dubbed a sideways market<\/em>.<\/p>\n\n

A sideways trend occurs when the forces of supply (sellers) and demand (buyers) are nearly equal. There is uncertainty\u2014competing story lines about the state of the global economy\u2014and hence the lukewarm outlook for corporate earnings. Because stock prices follow earnings growth, it makes for lots of up-and-down swings.<\/p>\n\n

So why do investors put up with this volatility? Simple, over time markets rise more often than they fall. Otherwise stocks couldn\u2019t earn a better long-term return compared to cash and bonds.<\/p>\n\n

Canadian growth in 2013 is tepid at 1.7 per cent, according to the Conference Board of Canada. The consensus outlook for 2014 is a little better: roughly 2.3 per cent. Improving U.S. fundamentals, like employment growth, consumer debt reduction, new home sales and manufacturing activity, continue to support the prospect of a renewed acceleration of U.S. and global growth next year. <\/p>\n\n

Canada benefits from better U.S. conditions and so our stock prices may follow. Even if 10-year government bond yields climb to 3.5 per cent, as BMO Capital Markets predicts, the environment will remain positive for stocks. Alternative choices, like interest-sensitive bonds, remain comparatively unattractive.<\/p>\n\n

When it comes to investing money, it\u2019s counterproductive to let recent events skew your perception of the future. WDS takes the long view, with a three-to-five-year investing horizon in mind. Our experienced portfolio managers know that the key to successful investing is simple: keep buying quality companies at good prices. At this point economically sensitive sectors, like technology, industrials, and energy, present opportunities.<\/p>\n\n

Here at WDS, we believe the stock market is the place to be, and that it will do better still as investment capital flows back into stocks. We have no idea when this particular prolonged sideways market will end, but it will. They always do.<\/p>\n\n\t\t<\/div>\n\t<\/div>\n<\/div><\/div><\/div>

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RESULTS<\/span>\nat a glance<\/span><\/p>\n\n

Long-term interest rates rose this quarter, with negative impact on fixed income returns. Otherwise year-to-date values are positive\u2014with the notable exception of gold\u2014and the U.S. markets continue to outperform ours here in Canada.<\/p>\n\t\t<\/div>\n\t<\/div>\n<\/div><\/div><\/div>

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<\/th>\n Close
30-Sep-13<\/th>\n 		Close
28-Jun-13<\/th>\n 		Close
31-Dec-12<\/th> \n 		YTD
Change<\/th>\n <\/tr>\n <\/thead>\n
S&P\/TSX Composite<\/td>\n 12,787<\/td>\n 12,129<\/td>\n 12,433<\/td>\n 2.8%<\/td>\n <\/tr>\n
S&P 500<\/td>\n 1,681<\/td>\n 1,606<\/td>\n 1,426<\/td>\n 17.8%<\/td>\n <\/tr>\n
GoC 10-Year<\/td>\n 2.54%<\/td>\n 2.44%<\/td>\n 1.80%<\/td>\n 74bps<\/td>\n <\/tr>\n
US Gov 10-Year<\/td>\n 2.64%<\/td>\n 2.52%<\/td>\n 1.78%<\/td>\n 86bps<\/td>\n <\/tr>\n
CAD$ \/ US$<\/td>\n 0.9723<\/td>\n 0.9513<\/td>\n 1.0051<\/td>\n 3.2%<\/td>\n <\/tr>\n
WTIC Oil<\/td>\n $102.33<\/td>\n $96.59<\/td>\n $91.74<\/td>\n 11.5%<\/td>\n <\/tr>\n
Gold<\/td>\n $1,326.50<\/td>\n $1,232.10<\/td>\n $1,674.00<\/td>\n -20.7%<\/td>\n <\/tr>\n
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Returns are based simply on price appreciation (dividends are excluded).<\/em><\/p>\n

Foreign indices are based in USD.Source: TD Securities Inc. Market Statistics & Returns<\/em> as of September 30, 2013.<\/p>\n <\/td>\n <\/tr>\n <\/tbody>\n<\/table>\n\t\t<\/div>\n\t<\/div>\n<\/div><\/div><\/div><\/div>

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\nWhat counts for most people in investing is not how much you know, but rather how realistically they define what they don\u2019t know. An investor needs to do very few things right as long as he or she avoids big mistakes.\n<\/p><\/blockquote>\n

– Warren Buffett, Chairman\u2019s Letter – 1992<\/em><\/p>\n\n\t\t<\/div>\n\t<\/div>\n<\/div><\/div><\/div>

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ASK & ANSWER<\/span>\nRESPs: Can I avoid the 20 per cent RESP withdrawal penalty if my son doesn't pursue post-secondary education?<\/span><\/p>\n\n

ASK<\/strong>
\nMy youngest son quit university after his second attempt, with no plan to ever return. His older brother finished university and is now working. The family RESP has been open since my first son was born in July 1989, and there's still money left in the plan. I'm told that a 20 per cent tax penalty applies if the RESP is collapsed. What can I do to avoid the hit?<\/em><\/p>\n\n

ANSWER<\/strong>
\nRESPs have three notional balances: Canada Education Savings Grants (CESG), contributions, and income. The CESG portion is equal to 20 per cent of the contributions made to the plan until the beneficiary reaches age 17. When the plan closes, different things can happen depending on what kind of balances remain.<\/p>\n\n

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  1. The CESGs are returned to the government, because it provided them in the first place. <\/li>\n
  2. The contributions are returned to the subscriber\u2014 the person who opened the RESP\u2014 without any taxation or penalties.<\/li>\n
  3. The rest is called an Accumulated Income Payment (AIP), which, as the name implies, consists of earnings on both contributions and CESGs.<\/li>\n<\/ol>\n\n

    Now, as a subscriber, you may withdraw the AIP portion providing the following conditions are met:<\/p>\n\n