Alexander Odas
302-2400 Bevan Ave. V8L 1W1 Sidney, BC, Canada

July newsletter: Economic recovery The global economy led by the U.S. continues its gradual recoverysupported by economic reopening and COVID-19 vaccine distribution. Stronger consumption is expected through 2021 fueled by consumers with excess savings and pent-up demand for goods and services. The recovery ends as the services sector catches up to the manufacturing sector’s recovery. In this environment, average market returns are expected during the next couple of years wi...Continue reading

Eligible dividends and the OAS clawback: receiving dividends may still be better than interest from an after-tax income perspective. Why? The benefit of the dividend tax credit may outweigh the costs.

The risks posed by an overheated housing market and high household debt levels have increased in recent months.

Quarterly market update: A year after the pandemic low, the economy is set to surge. March 23 marked the one-year anniversary of the market low brought on by the pandemic. Since then, the S&P 500 has seen its largest 12-month gain since 1936, exceeding the recovery in 2010 from the global financial crisis. Equity markets performed well through the first quarter, extending the gains made since March last year. The S&P/TSX rose 7.3%, while the S&P 500, Nasdaq and MSCI EAFE resp...ectively gained 5.8%, 2.8% and 2.8% in U.S. dollar terms. Perhaps the biggest surprise to the market was the increase in bond yields. The U.S.10-Year Treasury Yield started the year at 0.91% and very quickly rose by 83 basis points to end the quarter at 1.74%. The 10-Year Government of Canada bond yield gained 88 basis points to finish the quarter at 1.56%. An optimistic outlook The story for the first quarter has been one of optimism surrounding the reopening of the global economy. Vaccinations are rolling out, with more than 693 million doses administered across 165 countries. In the U.S., which has suffered the highest death toll from the virus, more than 168 million doses have been given, and almost 18% of the population is fully vaccinated. Further boosting hope in the States is another round of stimulus, with cheques on their way to over 100 million people. Inflation We’re forecasting sustained higher inflation through 2021 with only some moderation in early 2022. Evidence of higher inflation is already making its way through the economic data as prices surge for raw materials. Lumber, one of the biggest costs in home building after land and labour, has never been more expensive and is more than twice the typical price for this time of year. Crude oil, a starting point for paint, drain pipe, roof shingles, and flooring, has shot up more than 80% since October. Copper, which carries water and electricity throughout homes, costs about a third more than it did in the fall. Given the low levels of business inventories combined with the backlog of orders and unusually strong demand, the direction for inflation is most likely higher, not lower. Economic growth We expect economic momentum to continue, driven by several factors: a rapid reopen of the U.S. and global economies due to increased vaccine availability; fiscal and monetary stimulus; pent-up consumer demand; and massive savings. On fiscal stimulus alone, at the end of December 2020, governments around the world had committed US$7.8 trillion in foregone revenues or fiscal spending programs, with an additional US$6 trillion in liquidity support. Historically, fiscal stimulus can take months to years to fully work its way through economies. We believe we’ll continue to feel the positive effect of this stimulus through the remainder of this year and into 2022. As always, if you have any questions about the markets or your investments, I'm here to talk.

What’s new for the 2021 tax-filing season Tax season is underway, and Canadians may be facing some unfamiliar terrain. Job losses, side gigs, and working from home were just some of the by-products of 2020. Those who received emergency government support may find themselves owing taxes for the first time. Along with traditional tax-reduction strategies like contributing to a Registered Retirement Savings Plan (RRSP), there are a few new tax credits and deductions that can hel...p you keep more of your hard-earned money. Simplified process for home office expenses With so many Canadians working from home due to the pandemic, the Canada Revenue Agency (CRA) introduced a new temporary flat rate method for claiming home office expenses for 2020. Those who worked from home more than 50% of the time for at least four consecutive weeks can claim $2 for each day, up to a maximum of $400. If you plan to use the original detailed method to claim work from home expenses, your employer must provide a Form T2200S or T2200. Digital News Subscription Tax Credit You can claim the cost of a digital subscription to a qualified Canadian journalism organization for the years 2020 through 2024. The non-refundable tax credit is calculated at 15 per cent, up to a maximum of $500 in annual subscriptions, which translates to as much as $75 in savings each year. Canada Training Credit This new refundable tax credit can help with costs to upgrade your skills to stay current in today’s job market. Beginning in 2020, workers aged 25 to 65 can claim fees for college, university or other educational institution in Canada providing courses at a post-secondary level, or an eligible institution in Canada that provides occupational-skills courses. Canadians automatically accumulate $250 annually, up to a lifetime maximum of $5,000. Pandemic emergency funds Government programs have been a welcome relief for many households, but this income is taxable. The Canada Emergency Response Benefit (CERB) and the Canada Emergency Student Benefit (CESB) rolled out in the first wave of federal pandemic support and no taxes were withheld at source. So, recipients will be taxed on the full amount received. The Canada Recovery Benefit (CRB), Canada Recovery Sickness Benefit (CRSB), and Canada Recovery Caregiver Benefit (CRCB) are part of the second wave of federal pandemic support, and the CRA withholds a 10% tax at source. It’s important to understand if you’re in a position where you may owe taxes and what strategies you can use to help lower your tax bill. If you have questions about the markets or your investments, I’m here to talk.

What a year! 2020 will go down as one for the history books. The first reports of a mysterious virus quickly turned into a pandemic, global shutdown and the worst economic crisis since the Great Depression. And yet, by the end of the year, markets had recovered beyond expectations. In March, all eyes were on the S&P 500, S&P/TSX, Nasdaq, and MSCI EAFE Indices as they fell approximately 34%, 37%, 30%, and 34% respectively. Every economic downturn in history has led to an uptu...rn, and this time was no different except perhaps the speed at which the drop and rebound occurred. The S&P 500 closed at the end of 2020 with a record high price index of 16.3% year to date, and the S&P/TSX, Nasdaq, and MSCI EAFE year-end price indices were 2.2%, 43.6%, and 5.4% respectively. For investors, the best opportunity occurs when equities fall 30% or more from their peaks, and this proved true again last year in terms of returns from the bottom. While that ideal bottom of the market investment opportunity has passed, we’re still optimistic about the year ahead. There’s reason to believe that the economic environment in Canada, the U.S. and internationally will be much improved from 2020. A few points worth noting: Coronavirus. Areas of Canada and the U.S., along with several European nations, are experiencing a second round of lockdown. However, there’s far less uncertainty this time around. We know what to expect and we know it works. There’s also light at the end of the tunnel as vaccines are continuing to roll out in several countries. Canadian dollar. We believe the CAD will continue to rise relative to the U.S. dollar (USD). As oil prices continue to trend higher, we anticipate the loonie trading at US$0.79 over the course of the next 612 months. Thematic investing. There’s increasing interest in this type of investing, which looks at long-term trends and identifies opportunities based on where the world may be heading. Not surprisingly, we’re seeing increased attention in the areas of pharmaceutical, health, digital initiatives, and e-commerce. Environmental, social, and governance (ESG) investing, and plant-based nutrition are also areas to watch. Inflation. Prices will continue to rise in 2021, however, central banks will likely keep interest rates low until well into 2022. This is not a time to sit on the sidelines, but a time to make calculated investment decisions. And if the markets do pull back at some point early in 2021, remember what happened last year and be ready to take advantage of any investment opportunities. As always, if you have questions about the markets or your investments, I’m here to talk.

Canadians who take CPP at 60 lose $100,000 in retirement income, study finds

Knowledge is power November is Financial Literacy Month in Canada. Now in its 10th year, this initiative aims to help Canadians better manage their money and debt, save for the future, and learn about the resources available to them. The term literacy is no mistake. A good understanding of money is as essential as knowing how to read and write yet many of us were never taught these skills growing up. Even for those with a good handle on their finances, 2020 has thrown so...me curveballs. COVID-19 has put millions of Canadians out of work and sent investments on a wild roller coaster ride. An important step in improving your financial literacy is taking an active role in creating your financial plan. I’m here to work with you and I want you to feel empowered in the decision-making process. If you want to learn more about investing, estate planning, tax planning, or how to protect your money, the Manulife Securities Investor Education Centre (www.manulifesecurities.ca//resourc/investor-education.html) is a great place to start. It has short articles and videos on a wide range of topics. As always, if you have any questions, I’m here to talk. Wishing you a happy Financial Literacy Month!

Federal tax bracket thresholds for 2021: The 33.0% tax rate begins at taxable income of over $216,511, up from $214,368 in 2020. The 29.0% tax rate begins at taxable income of over $151,978, up from $150,473 in 2020.... The 26.0% tax rate begins at taxable income of over $98,040, up from $97,069 in 2020. The 20.5% tax rate begins at taxable income of over $49,020, up from $48,535 in 2020. Income below $49,020 is taxed at 15.0%. The basic personal amount for 2021 is $13,808 for taxpayers with net income of $151,978 or less. At income levels above $151,978, the basic personal amount is gradually clawed back until it reaches $12,421 for net income of $216,511.

The TFSA new contribution limit for 2021 has been officially released. That limit is $6,000, matching the amount set in 2019 and 2020.