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Market Update for October 2017

By Isaac Schweigert | November 23, 2017

October was a good month for both stock and bond markets around the world.  With the end of the year just around the corner, now is a good time for some final tax planning before its too late.


October 2017 Market Performance

All index returns are total return (includes reinvestment of dividends) and are in Canadian Dollars unless noted.


Other Market Data Month-end Value Return for October 2017 Return for 2017
Oil Price (USD) $54.38 +5.24% +1.23%
Gold Price (USD) $1,270.50 -1.11% +10.32%
US 3 month T-bill +1.15% +0.09%* +0.64%*
US 10 year Bond +2.38% +0.05%* -0.07%*
USD/CAD FX rate 1.2764 +2.28% -4.94%
EUR/CAD FX rate 1.4833 +0.62% +4.69%
CBOE Volatility Index (VIX) 10.18 +7.50% -27.49%
*Absolute change in yield, not the return from holding the security.


The S&P/TSX Composite was up +2.7% in October, and is up +7.3% so far in 2017.  In the US, the S&P500 hit several new record highs during the month and finished the month up +2.3%. European stocks also had a good month and were up +2.0% in October, driven again by strong performance from German stocks.  Emerging markets continued their unbroken string of positive months in October with a gain of +3.8% in local currency.  Despite being on track for their best year since 2009, emerging markets are still attractively valued, especially compared to US markets.

The major bond indexes all posted positive performance for October. The broad index of Canadian bonds, FTSE TMX Universe Bond Index was up +1.6% in October, its best month of the year.  The FTSE TMX Short Term Bond Index was up +0.6% for October, also its best month of the year.  The Merrill Lynch US investment grade and high yield bond indexes were also positive,  but unlike in Canada October wasn’t the best month of the year for those indexes.  Emerging market bonds, when measured in Canadian dollars were also up for the month at +3.5%.

Crude Oil was up again in October at +5.2%, turning oil positive for 2017 at +1.2%.  Gold was down again, this time -1.1%.   The broad Bloomberg Commodity Index was up +2.0% in October, but is still down -1.5% for 2017.

The strength in the Canadian dollar from the Bank of Canada’s interest rate change was short lived.  Against the US dollar, the Loonie lost -2.3% in October, and lost -0.6% against the Euro.



We’re a little more than a month away from Christmas, do you know how much you’re going to pay (or have paid) in tax this year?  There is still time to reduce your tax bill for 2017.

Unlike with RRSPs, where you have until March 1 (or February 29 in a leap year) to reduce your tax bill, there are a few things you need to do before the end of the year to help save on taxes.

If you have investments in an unregistered, or taxable account, now is a good time to look at what your taxable gains or losses are on those positions.  If you have any that are worth less than you paid, consider selling them before the end of 2017.  For non-Canadian stocks and other non-Canadian investments, make sure to take the change in the foreign exchange rate into account.  Depending on what the exchange rate was when you bought, you could have significant tax losses available even if the price in the local currency hasn’t moved at all.

What if you have something that has a loss but you like the investment outlook?  Unfortunately, you can’t sell it today and buy it back tomorrow due to superficial loss rules.  This rule is applied at the taxpayer level, not at the account level.  That means you can’t sell the stock in your unregistered account and buy it back in a registered account like an RRSP or TFSA.  This is also why if you transfer a losing position into an RRSP or TFSA you can’t claim the loss on your income tax return.

Conversely, if there is something with a gain you’ve been meaning to sell you may want to sell before the end of the year if you expect your tax rate to go up next year.

Other things you can do before year-end to reduce your taxes:

Make donations to registered charities.  Christmas time is a great time to think of those that may not have been as fortunate you.  Food banks, toy drives, animal shelters, and others can often be forgotten this time of year and when they may need it the most.  If you want a tax receipt, make sure to donate at least $20, the minimum amount that most charities will issue a tax receipt for.

If you have mutual funds that you want to sell, make sure you do it before the year-end tax distributions are made.  Conversely, if you were planning on adding to a mutual fund position (and if you’re already a ModernAdvisor client, we hope this doesn’t apply to you), consider waiting until after December 31 to avoid receiving any year-end tax distributions.  Index mutual funds and ETFs may also make year-end tax distributions, but they are typically a small fraction compared to those made by actively managed mutual funds.


Lastly, if you’re a BC resident, you can look forward to the Medical Services Premiums (MSP) is being cut by 50% on January 1.  For those making more than $42,000 per year that means a savings of $450 for 2018.


October Economic Indicator Recap

Below are the current readings on the major economic indicators: central bank interest rates, inflation, GDP and unemployment.

Below are the current readings on a few other often followed economic indicators: retail sales and housing market metrics.

A Closer Look at the Canadian Economy

Canada’s unemployment rate was flat in September at 6.2%, as a net 10,000 new jobs were added.  112,000 full time jobs were added, the largest monthly gain since 2007.  102,000 part time jobs were lost, the largest loss since 1980!

Housing prices across Canada declined -0.8% in September, the largest monthly decline since September 2010.  The decline was attributed to a -2.7% decline in Toronto.  Quebec City and Hamilton were down -2.3% and -1.9%, respectively.  Vancouver was the top performing market at +1.3%.

The level of new housing starts declined -3.9% in September, while the value of building permits issued declined -5.5% in August.

The inflation rate was up +0.2% in September, or +1.6% on an annual basis.  Core inflation which excludes more variable items such as gasoline, natural gas, fruit & vegetables and mortgage interest was +0.8% for the last year, a level not seen since the 1980s.

Retail sales declined -0.3% in August.  Sales declined at grocery stores, home improvement and garden centres, and home furnishing retailers.  Gains were reported at gas stations and car dealers.  Compared to a year ago, retail sales were up a healthy +6.9%.

Canada’s GDP declined -0.1% in August, the first monthly decline since October 2016.  Declines in mining, oil & gas, and manufacturing drove the negative GDP report.

At their October 25 meeting the Bank of Canada left their benchmark interest rate unchanged at +1.0%.


*Sources: MSCI, FTSE, Morningstar Direct, Trading Economics

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Isaac Schweigert

Isaac Schweigert

Isaac is a CFA charterholder and is Portfolio Manager and Chief Compliance Officer at ModernAdvisor. He has over 11 years of investment industry experience, including asset allocation, portfolio management, due diligence, compliance and reporting.