CANADA An unfortunately familiar theme over the past several quarters has seen the S&P/TSX Composite index grossly under-perform the American stock markets, and Q1 2018 was no exception. The TSX fell over 5% in Q1. Energy continues to fall out of favour in the Canadian market as the sector represented on the TSX declined more than 10% - this is despite various oil prices (eg. WTI – Western Texas Interme-diate Crude oil) seeing gains of over 8% in the quarter. Part of the reason for this un-der-performance is due to a widening gap between the value of Canadian oil (West-ern Canada Select oil, produced in Western Canada) and American oil (eg. WTI). This gap has widened to its largest difference (more than $25 USD a barrel) in nearly 4 years. Most of this drop in Canadian oil value can be attributed to both a lack of pipeline capacity and transportation bot-tlenecks affecting the flow of oil. Unfortu-nately, certain Canadian politicians serving to resist this flow rather than support it, has made matters worse for the sector. Some prominent Canadian busi-ness leaders, such as RBC’s CEO Dave McKay, have taken notice to the Canadian underperformance and is concerned that both investors and young talent (employ-ees) have been migrating south of the bor-der. McKay believes developments such as U.S. corporate tax reform has only strength-ened the case to move capital from Cana-da to the U.S. and believes the Canadian government must step up to help Canadian businesses remain competitive. From an investor standpoint, we certainly see valid-ity to these concerns because the majority

of our own investment additions have gone south versus staying at home. That being said, it’s important to stay diversified, and the Canadian investments we’ve hung on to are supported by long track records of per-formance, and are well-positioned to take part in an eventual Canadian recovery.

UNITED STATES We wrote on the last line of the Q4 market commentary “Investors will likely see a bumpier ride in the year ahead, which simply means a ‘return to normalcy’ ”. Boy, we didn’t predict the Dow Jones In-dustrials (DOW) would have one of the worst March losses in nearly 40 years. A repeat of history is never exactly the same but events often rhyme and so does rever-sion to the mean in financial markets. The melt up peaked in January when the For-ward P/E ratio (a common metric to value stocks) of the S&P 500 hit 18.3 at the end of January – that is well above the 25-year average of about 16. The normally quiet U.S. bond market started selling off, push-ing the 10-year Treasury rate close to 3%; this stemmed from an ‘overly-inflationary’ U.S. jobs report which prompted fears that the Federal Reserve would be forced to raise rates faster to combat the inflation. The S&P 500 index subsequently dropped 10% in 9 trading days from the highs set in January (TSX dropped 7.4%). The correction finally arrived after nearly 600 days without even a 5% negative de-cline. This pullback was somewhat unique because historically a sharp correction in stocks was paired with a positive for U.S. Treasuries. However, this time around bond investors lost along with equities. That being said, an economic recession was far

Capital Care

MARKET SUMMARYJoeford Lee B.A., CIM, CFP®, FCSI

Portfolio Manager JFL Group - HollisWealth, a division of Industrial Alliance Securities Inc.

1 West Pearce St., Suite 703Richmond Hill, ON L4B 3K3

Telephone: 905-737-0737

Toll-Free: 1-877-554-0737

Fax: 905-907-0598

E-mail: joeford.lee@holliswealth.com

Website: http://www.jflgroup.ca

IN THIS ISSUE...Market SummaryExtraordinary Volatility to Start 2018...

SnapshotsTax Tips for Students and Parents...

The Renting Vs. Buying DebateIs it Smarter to Rent or Buy a Home?...

Short Guide on Tax BenefitsSnippets of information from iA Financial Group....

Spring 2018

from the minds of investors, supported by the Fed’s forecast of economic growth, calling for a 4% pace in the first quarter. Following a rocky February, President Trump began his path to trade tariffs. It started with the announcement on March 1st with steel and aluminum imports. The world’s global steel production is about 1.7 trillion metric tonnes. China is by far the largest producer, accounting for 49% of that production. America produces only 5% but is the world’s largest importer of steel at about 29 billion metric tonnes. How-ever, Canada and Mexico account for a sizable portion of those steel imports. Ben May, a director at Oxford Economics, said that 88% of steel exports went to the U.S. in 2016 from the two NAFTA partners. In the following weeks, the European Union published a list of hundreds of American products that would be targeted if Trump carried forward with steel and aluminum tariffs. Soon after Trump granted exemp-tions to EU, South Korea, Australia, Brazil and Argentina. The financial markets may have been relatively muted with the first shot of trade tariff actions by POTUS, but didn’t take kindly to Trump’s next act. Trade war fears began to escalate in late March when Trump targeted approximately $50 billion of imports from China citing a “theft of American intellectual property”. China responded immediately with levying du-ties of their own on $3 billion of American imports. This systemic market turmoil was not without influence from negative cor-porate news, especially within the tech sector (which has driven the S&P 500 for some time). The uproar on misuse and lack of protection with Facebook user data drove big declines on the entire sector. Investors are becoming increasingly concerned that the loosely-regulated online playing-fields that behemoths like Facebook, Google, and Amazon operate on, may begin to tighten considerably. Tech also saw big share price declines to a few other sector heavyweights (eg. Tesla, NVIDIA, and AMD) as revolutionary technology such as artificial intelligence and autonomous driving, may have been partially responsible for a pair of fatal car accidents in March. While these headlines have undoubtedly helped to fuel recent market volatility, we believe Technology will continue to be a significant catalyst in driving the economy higher long-term. While volatility in the short term is unnerving, it provides an attractive entry point for long term investors.

Homeownership is on a sharp decline amidst an ongoing and increasingly popular trend of home renting as an alternative. As Statistics Canada revealed, only 50.2% of millennials (age 30s) owned houses compared to 55% of their baby boomer parents at the same age in 1981. However, that sharp decline does not downplay the influx of the millions of millennials aiming high to run the same path as their baby boomer parents. Unfortunately for them, the housing market is not as forgiving as it was many years ago. With the guidance of financial experts, many have looked past the ideals of the “American Dream” and into a less conventional path: renting. The question is, is that a smart alternative? Ultimately, the debate on either sides has both financial and non-financial implications. Perhaps looking to rent or buy a house is based on more than just your affordability, but also on the importance of emotional, environment, and flexibility issues.

AFFORDABILITY When deciding whether buying or renting a home is right for you, the first step to take in your process is to determine whether or not you can afford it. As a millennial just starting out, you would most likely be looking for two-bedroom con-dos to live in Toronto. According to the Canada Mortgage and Housing Corporation (CMHC), the average costs of renting would total up to around $2300 a month. And according to the Toronto Real Estate Board (TREB) looking at a 5-year term of house ownership, current selling prices are averaging around $550,000. After putting down $137,500 (25%), a mortgage of $412,500 plus maintenance fees and property tax would come down to $3256 per month. That could mean renting could translate to a monthly savings of $956. This saving is only the beginning but the best financial outcome will depend on a number of input variables in your calculation. However, these base prices are not the only costs to consider before making your decision as there are many underlying financial considerations that you need to think about. If you were to buy a home, there are extra monthly costs such as utilities and maintenance costs that adds to the cost of homeownership. For those who have the financial means, one reason why they lean towards renting is due to the fact that renting does not involve any of these upfront costs and have fewer on-going costs. If the funds for the downpayment is invested properly those that say “renting is wasting money” are ill informed. Renting is nowhere near a ‘waste’ as you are acquiring a place to live and growing your net worth through other financial

The Buying Vs. Renting DebateIs it smarter to rent or buy a home?

Snapshots: Starting Outtax tips for students & parents

GST/HST CreditApplicable to those with low or modest income, namely students, you could be entitled to a total of $284 payable to you throughout the year (quarterly payments of at least $71). On top of GST/HST cred-its, you could also be entitled to provin-cial credits too.

Student Loans Interest DeductionUnlike the previous few tax credits, the Student Loan Interest Credit can only be claimed by students. Interest expenses can be tax deductible or, if you don’t need it, you may carry forward your interest for up to five years.

Moving DeductionsIf you are moving for (1) summer em-ployment or (2) educational opportuni-ties, the Income Tax Act (ITA) provides a deduction from income for the expenses incurred during your process. In order to be eligible for either, the move made must be 40km closer to the new location.

Filing a ReturnThe importance of filing a tax return is grand for anyone who has earned any income in the previous year and not just because one owes tax. Students can start creating room for their registered retire-ment savings plan (RRSP) which gives the opportunity to save tax when RRSP contributions are made in the future.

Tuition Tax CreditIf you’re enrolled in post-secondary education, you could be eligible for some tax relief from tuition tax credit to reduce tax payable to zero. However, if you have little to no tax payables, you can instead (1) transfer up to $5,000 in tuition credits to a spouse or partner, a parent or a grandparent to help reduce their taxes. Or you can (2) carry it forward to use in future years.

We would like to inform you of a change to your JFL Group team. Daniel has done a tre-mendous job serving both our team and clients for many years and will undoubtedly be missed by all of us as he has moved on to pursue other op-portunities. We wish him all the best and success in his fu-ture endeavours.

Service Assessment Survey We sincerely want to thank all of you who complet-ed our Service Assessment Survey. Your opinion is very important to us and we will read and take note of every response to each question. A summary of our findings will be published in the upcoming summer issue of the Capital Care Newsletter.

Our congratulations to the win-ners of the draw for dining cer-tificates:1. Cesare F. of Toronto2. Angelo M. of Hamilton3. Sandra T. of AuroraAdministration Please note the applica-ble annual Trustees Fees for Registered Plans will be de-ducted and charged in June rather than in August.

Housekeeping

instruments by saving and investing. It is true that homeownership was a no losing proposition over the last 20 years but far fewer young adults can afford to buy in metropolitan centres today. The robust real estate prices have elevated financial risk of home ownership. Many new home-owners are merely big borrowers and like any highly leveraged investment is putting their hard earned savings at risk. Renting is less riskier than homeownership as own-ing can easily and unpredictably turn from an asset into a liability - an example being that a 10% house price correction could wipe out the down payment.

NON-FINANCIALS It is imperative to consider your af-fordability when deciding between owning vs. renting, however there are many other factors that exist that cannot be financial-ly justifiable and may end up outweighing your financial considerations. Is appropri-ate space based on a need or a want. Pay-ing for unused space can add to financial strain. A millenial may not be able to own in their desired neighbourhood for years but renting can satisfy their immediate needs. Having a rental gives you flexibility to change and shift to meet your changing needs of location, environment and ulti-mately your future. Our futures, especially millennials are incredibly sensitive to little changes such as lifestyle, incomes or career

opportunities. Instability is on the rise with the rapid growth of pre-carious work and through these employment trends, bring a bigger need for mobility and adaptabil-ity to one’s constantly changing environment. Furthermore, there are too many emotional factors to make a complete decision based purely on math. The idea of hav-ing a home of your own has been a standard “American dream”, A symbol of success, stability, and identity. To many, homeowner-ship gives pride, privacy, security, and freedom.

IN SUMMARY Ultimately at the end of the day, buying a home is both an emotion-al need and a desire to build up personal net worth. Who can argue against first home ownership as the most coveted goal. However, the price or perhaps the sacrifice to attain home ownership today is far cost-lier than it was at the turn of the millen-nium. At least this is the case in the two urban centres of Toronto and Vancouver. This has all to do with unrelenting and un-interrupted price increases in residential real estate for the last 20 years. What hap-pens in the next 20 is unknowable but we have never reached this level of consumer debt relative to disposable income in our

history. Statistics Canada reported a 171.1% ratio for household credit market debt as a proportion of household disposable income in December 2017, a jump from 170.1% from the second quarter. There is no easy answer to ownership or renting, we have to ask many more important questions than just to satisfy a want. It is important to consider an indi-vidual’s financial job security and the pros-pect of increasing income. Are you a disci-plined saver or are you an “out of sight out of mind” mortgage payer? Can you still save for retirement after mortgage payments? Is a person’s need for homeownership equivalent to a need to feel more financially secure?

The paper in this document is sourced from an SFI Certified Chain of Custody company. SUSTAINABLE FORESTRY INITIATIVE Logo is a registered mark owned by Sustainable Forestry Initiative Inc. This information has been prepared by Joeford Lee who is a PortWfolio Manager for HollisWealth® and does not necessarily reflect the opinion of HollisWealth. HollisWealth® is a division of Industrial Alliance Securities Inc., a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. The information contained in this newsletter comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors. The Portfolio Manager can open accounts only in the provinces in which they are registered.JFL Group is a personal trade name of Joeford Lee. For more information about HollisWealth, please consult the official website at www.holliswealth.com.

SHORT guide on tax and benefitsThe following includes snippets of important information from iA Financial Group’s

annual tax reference sheet.