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Outlook: notes on stock and real estate markets
4/25/2018 4:20:30 AM
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Valuable insight and opinion on financial, investment, and retirement planning from an experienced industry expert.

By Bruce Loeppky  | Thursday, May 11, 2017


The current equity bull market is getting long in the tooth. The last major stock market correction was in 2008-09, following the U.S. credit crisis, a contagion that then spread globally because our markets are tied together in many ways. If you are investing substantial sums in the current market environment, remember that now is not the time to be really aggressive, with only a couple of small exceptions.

Those exceptions are in select precious metals or resource issues. The bottom fell out of those sectors, and they’ve been lagging for over five years, with many stocks still underwater in terms of 10-year returns. But they are already on the upswing, and some of the low-hanging gains have already been picked. Invest cautiously in these areas, keeping your asset allocation targets in mind to reduce downside risk somewhat.

Across the funds industry, it has been quiet with very little merger and acquisition (M&A) activity. After the last 15 years of fund industry consolidation, we now have the big banks and about eight other very large mutual fund/investment companies dominating the industry, along with a handful of smaller, more nimble companies filling the niche markets.

Most of the mid-tier fund companies have been bought out or merged into the larger outfits we see today. And in the face of increasing competition, most of these are now actively reducing management expense ratios (MERs) and fine-tuning high net worth (HNW) programs to make them more efficient. Because it is so lucrative for money managers, the HNW space is very competitive, so for the well-heeled investor, at least, it’s a bit of a buyer’s market when it comes to money management.

Real estate

On the other hand, real estate, especially in Canada’s large urban areas, has definitely been a “seller’s market” recently. House prices in Toronto, Vancouver, Victoria, and a few other urban centres are making life very difficult for young families (and many others too) looking to purchase their first homes. In many cases this is where the jobs are and where they may wish to live. But the question is, can they afford to? In the 20-to-30-year age bracket especially, many are finding it tough to live where they want using only their own resources.

This has resulted in more loans from “the bank of Mom and Dad” to help them get into the market. But if you are in fact “the bank of Mom and Dad,” and you decide to go down that road, make sure you adjust your will to ensure fairness to other children. For example, if one child has already received $75,000 to help with a home purchase, but the will splits the estate equally, there could be some disputes down the road. While we would like to think this wouldn’t happen, it’s better to have everything laid out legally.

Another option that is becoming more and more common with my clients is co-ownership of a home, where Mom and Dad may live downstairs and the children’s family lives upstairs. The parents can travel without concern about the yard work or home safety, and the kids can get into the real estate market, so this often works out well. This solution may also give the parents some “travel money.” Just ensure you have a formal legal document in place, which lays out the rules of ownership and/or tenancy under various circumstances.

Co-signing for a home purchase is another option, but then the parents are legally responsible and liable for the debt. So I am not as keen on this option. Parents have sacrificed enough to bring children into adulthood. They should not have the stress of financial worries in retirement resulting from a mortgage debt that a child can’t pay because of job loss or other circumstance.

Some observers believe the high real estate values in the areas I’ve mentioned indicate a “bubble,” which may be due for a large correction. I disagree. Toronto, for instance, is the cultural and financial centre of Canada, and growth shows no signs of slowing. That won’t change. Geographically, Vancouver is a desirable location because it is the warmest major city in Canada, where it is often possible to ski in the morning and golf in the afternoon. It has the scenery and the lifestyle and, because of its vibrant economy, the jobs. These markets will remain in demand for all those reasons, presenting both challenges and opportunity for investors and homeowners alike.

Bruce Loeppky is based in Surrey, B.C. and is registered with Portfolio Strategies Corporation as a mutual funds person. He is a regular contributor to the Fund Library. He can be reached at

Notes and Disclaimers

© 2017 by Fund Library. All rights reserved. Reproduction in whole or in part by any means without prior written permission is prohibited.

The foregoing is for general information purposes only and is the opinion of the writer. No guarantee of performance is made or implied. This information is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice. However, please contact the author to discuss your particular circumstances.

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