Article by Marcel LeBlanc for the Times & Transcript January 17, 2019

Have you ever wondered why it’s easy to convince yourself you deserve a trip every year yet it’s hard to bring yourself to increase your retirement savings? There’s a fairly simple economic model that is used to explain our preference in relation to consumption and savings over the course of our lives. This model can help explain why we make the choices we make and why we’re naturally inclined to make decisions that can hurt our financial success.

Equity Markets

Equity markets felt differently based on which region you were in this quarter. Certainly, the United States plays a central role in the world economy and investors felt comfortable buying more shares in its market. Investors were wary of other regions, which can in part be attributed to constant trade negotiations and frictions between the world’s largest economies. For most Canadian investors, this resulted in good returns from US equities but negative returns for Canadian and EAFE equities.

Equity Markets

Equity markets behaved well in the second quarter, a nice rebound from the first quarter of the year. Canadian investors benefitted from a strong domestic market and from a weak loonie versus the US dollar, which helped US returns be more generous when translated in Canadian dollars. However, the opposite currency impact occurred for EAFE returns as the Canadian dollar strengthened versus other foreign currencies. Volatility levels have fallen from the levels experienced early in the year but remain higher than the unusually steady year we experienced in 2017.

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Stepping up against gender-based violence

On May 25, the Louisbourg Investments men put on red (or pink) high heels and participated in Walk a Mile in Her Shoes® for a good cause. Together, we walked down Moncton’s Main Street to symbolize our intolerance towards gender-biased violence and raise awareness on this important issue. Our team raised $9,080 for the South East Sexual Assault Centre!

Equity Markets

Last quarter, we commented on the unusual low-level of volatility. As this is no longer the case and market gyrations are more commonplace, it’s important to remember that volatility is the historical norm and not the exception. Investors continually worry, rightfully so, about macroeconomic and company specific risks. The worries of the day are global trade and the pace of interest rate increases. We feel it is healthy to have corrections, to consider risks, in what we feel is a generally positive investing environment. In this environment, Canadian equities started off the year limping for investors. US and International equities were volatile but performed better than domestic equities and were helped by a weakening loonie for Canadian investors.

I often get asked, “Scott, what is your best single piece of advice?” Typically, I will respond that sometimes the best move you can make is to limit making bad decisions. Financial planning mistakes made now may sabotage your retirement dreams later. Poor financial habits such as overspending, lack of planning and bad risk management will increase the probability you will outlive your money.

Volatility Makes a Comeback

After a long period of strong stock market returns with lower-than-average volatility (2017 witnessed the historical best ratio of high returns versus low volatility), a sudden drop over a few days or weeks always seems to come as a surprise for investors. It also makes for great headlines, which tends to feed client fears about their investments. The fact that market volatility stirs investors’ emotions is quite normal. Then again, market downturns are also, well, normal.

On one hand I find it confounding that many people only consider saving for their retirement once a year – and rush to contribute to their RRSP before the annual deadline. On the other hand, at least there is a deadline that forces them to contemplate their financial future at least once a year. The cutoff to make a contribution to reduce 2017 taxes is March 1st. For those sitting on the fence about whether to contribute or not, here are some compelling reasons why you should at least consider doing such.

Equity Markets

We can draw a parallel between our equity markets and the weather. This market is a like a warm and dry summer that doesn’t want to end. We can appreciate it but also must realize that winter will return at one point. Winter is volatility and stocks are still wearing their shorts. In calm fashion, all important equity markets for Canadian investors offered good quarterly returns to close out a profitable 2017. The most important themes are a return to a solid economic backdrop post energy crisis for Canadian equities, a corporate tax boost for US equities and improving economic strength for EAFE equities.