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Wealth Management
Review
www.rbcds.com | April 2021
Reopening optimism
By Jim Allworth
The Canadian and U.S. economies are clearly in the
“recovery” phase. Usually, once a recession is left behind,
economic activity accelerates for several successive
We’re listening to your quarters. Pent-up demand, restocking of depleted
feedback inventories, easy credit conditions and people going back
Based on feedback from our to work all act in concert to bring the economy roaring
clients, we have made some recent back to life. This period usually features the fastest GDP
updates to RBC Wealth Management growth rates of the new economic cycle.
Online. As before, you can safely
access your account information
Corporate profits and stock prices Classic pattern
online, whenever and wherever
follow the same path, collapsing Despite being unique in so many
it’s convenient for you. From your
in the recession and rebounding ways, this recession and subsequent
desktop, tablet or mobile device,
energetically as the economy begins recovery have so far followed the
you can send secure messages,
to recover. Typically, the stock market classic pattern. And there may be
make fund transfers and view your
paperless account documents, overdoes it in both directions, falling more upside for GDP and earnings.
including your tax slips. further than earnings decline in Governments have committed to
the recession, and then rising more more stimulus. Importantly for every
With the latest updates, you can steeply and sooner than earnings
view more information within tables
other economy, including Canada’s,
recover. the U.S. has added a $1.9 trillion relief
quickly and easily. Plus, we’ve added
more options to your Watchlists, package on top of the $2.9 trillion
At some point a year or so into the
including the ability to create last year, as well as a probable large
new cycle, “roaring” growth gears
hypothetical portfolios complete infrastructure initiative, although
down to a more sedate pace of
with transaction details. the latter likely wouldn’t have a big
economic expansion. The transition
impact before 2022. Government
To learn more, or to gain access to from “fast” to “sustainable” growth
spending initiatives in Canada and
RBC Wealth Management Online, usually provokes some soul-
elsewhere will keep the economic
please contact your Investment searching about whether it is a
fire well fueled as vaccine rollouts
Advisor team. portent of something worse. This is
progress into the summer.
often accompanied by volatility in
equity markets.
Continued on page 2
RBC Dominion Securities Inc.
Page 2 of 4
Reopening optimism
Continued from page 1
But the largest stimulus will come U.S. GDP growth rate YoY %
from the reopening of the global 10
economy. Sectors hardest hit 8
Shaded areas
by social distancing and travel 6
indicate recessions
restrictions will have a chance 4
to reopen with positive knock-on 2
effects for many other sectors, 0
employment and confidence. Much ?
-2
of the money transferred from -4
governments to households is sitting -6
GDP rebounds strongly coming out of recession
in bank accounts. Some significant -8
proportion of that will be spent in the -10
coming couple of years as conditions 1980 1984 1988 1992 1996 2000 2004 2008 2012 2016 2020
become more normal. Source: Federal Reserve; National Bureau of Economic Research
On top of all this, surging corporate recession is on the way are saying the inflation is likely to be stronger in the
profits, the pressing need for opposite. This economic expansion coming 12 months than previously
inventory restocking and the desire to appears to have room to run for some anticipated. Agricultural commodity
lessen reliance on Asian supply chains time yet. In our view, that pushes the prices are also climbing, portending
are driving capital spending in the next bear market out somewhere higher food prices down the road.
U.S., which should also yield positive beyond the horizon.
benefits to the Canadian economy. If these inflation increases look as if
Curveballs they are becoming persistent rather
Estimates rising in Corrections, however, are another than transitory, then investors will
anticipation of reopening matter. We see at least two risks start to worry that central bank rate
Index earnings estimates for this year (among many) that could induce hikes could begin sooner than the late
in both the U.S. and Canada have unsettling volatility in equity markets. 2023 timeframe currently priced into
been rising, reflecting better times One is the pandemic. Recent months debt markets. Inflation expectations
arriving in the second half of the have provided a reminder that the are also an important component
year. Markets have priced in much of virus remains capable of tossing of the equity valuation equation—a
this improving outlook—some would nasty curveballs. With new, more dollar of earnings earned 10 years
say all of it in the case of the U.S. challenging variants, vaccine from now is worth approximately 13%
market, where the S&P 500 sits at 22x production/delivery issues, vaccine less today than it otherwise would
consensus earnings estimates for this hesitancy forestalling the arrival of be if inflation runs over that interval
year, although that consensus number herd immunity and the possibility of at 3% per annum rather than today’s
continues to rise. Price-earnings some vaccine shortcomings revealed prevailing rate of 1.5%.
(P/E) multiples for Canada and other over time, the road to convincingly
Favour equities
developed country markets mostly sit vanquishing the pandemic is likely to
much lower, in the mid-teens. be a bumpy one. Considering all of the above, we are
left with a positive outlook for global
We expect the momentum provided by The other risk is inflation and the equities for the coming 12 months. We
reopening, the delayed impact of fiscal effect it can have on monetary policy expect the impact of the pandemic
and monetary stimulus, infrastructure and P/E ratios. We are about to will continue to subside over the
spending, and strong business capital encounter some larger-than-usual remainder of this year and into 2022.
spending will provide further solid increases in consumer price indexes The forecast rising tide of GDP and
GDP and earnings gains in 2022. In mostly because of comparisons with a earnings should permit broad market
anticipation, share prices should year ago when consumer prices were indexes to advance further from
advance over the coming 12 months. falling in April and May. In addition, today’s levels, worries about near-
gas prices are surging. The Fed has term overvaluation notwithstanding.
Our long-term investment stance can made it clear it sees these inflation
be stated succinctly: “If there is no increases coming but expects them to For our most current outlook for the
U.S. recession in sight, give global subside later in the year and further markets, please ask for our latest
equities the benefit of the doubt.” in 2022. However, the prices of many issue of Global Insight.
Most of our leading indicators that industrial commodities are also on Jim Allworth is co-chair of the RBC Global
would warn us in advance that a the rise, suggesting finished goods Portfolio Advisory Committee.
Page 3 of 4
Dealing with dementia
How to help safeguard the financial well-being of
loved ones facing the disease
Dementia is a disease suffered by over 500,000 Canadians.* In its various forms –
including its most common, Alzheimer’s – dementia is much more than the loss of memory
or recall often associated with aging. The disease has a debilitating impact on sufferers,
leading to a loss of awareness, basic math skills, judgement and planning. What’s more, it
can leave them highly vulnerable when it comes to their financial affairs.
and annuity payments can help
ensure their safe and timely
delivery – and are also easier to
track online.
• Keep track of key financial
documents. Collecting bank,
investment and insurance
documents in specific and well-
labelled locations can help reduce
stress, and improper use or theft
Here are some ways to manage the simplifying the structure of a of important financial information.
emotional and financial hardship that dementia sufferer’s portfolio.
dementia can cause: This reduces the need for them • Watch out for financial fraud
to make constant investment and scams. Setting up online
• Plan ahead. Especially as the decisions that can overwhelm transaction alerts can help
risks increase (e.g., age, injury, them and lead to increased stress. provide early warnings of
gender, hereditary factors), it’s improper, ill-advised or mistaken
critical to have a plan in place to • Ensure proper authorizations for financial activity before it’s too
quickly transfer financial and legal financial decisions are in place late. Also, minimizing possible
capacity to someone you trust in to empower trusted caregivers. interactions with scammers can
the event of incapacity. Power of Attorney and health care help reduce the opportunity
directives are critically important for fraud and abuse. To reduce
• Get a proper diagnosis. If you or to protect those suffering from telemarketing scams, add your or
someone you know is concerned dementia. Putting these in place, your loved one’s phone number
about memory loss, or problems ideally well in advance, can help to Canada’s national “Do Not Call”
with thinking and completing ensure that the right people list. Also consider unsubscribing
familiar tasks, talk to your doctor. have the proper legal authority to unnecessary email and social
to protect a dementia sufferer media sources.
• Advise key financial advisors.
in the event of incapacity, and
Make sure you inform your key
that their heath care wishes are This is not an exhaustive list, and
financial advisors, such as
understood and respected. Ask us ongoing and consistent contact with
investment advisors and bank
about how we can help you plan those suffering from dementia can
managers, of your or your loved
for incapacity. help their loved ones and caregivers
one’s condition following a proper
monitor and prevent financial issues
diagnosis. They can work with you • Simplify financial transactions. from arising.
to help manage the financial well- Automatic bill payments and
being of a dementia sufferer, and preauthorized debits can ensure Ask us how we can help you protect
safeguard them against financial that bills get paid on time, avoiding your financial well-being, and that
self-harm and/or fraud. loss of service and financial of your loved ones, in the event of
penalties. In addition, direct incapacity due to conditions such as
• Establish a straight-forward
deposits of pension, investment dementia.
investment plan. Consider
*Alzheimer Society of Canada, Prevalence and Costs of Dementia in Canada (Toronto: 2016), 22-23.
Page 4 of 4
Cyber smart: Six steps to stay safe
in an increasingly digital world
Our digital world provides ever-increasing conveniences, from shopping online to
managing finances. While it helps save time, it also means we need to take reasonable
precautions to protect ourselves from cyber criminals.
Unfortunately, scammers are streaming sites), using a reputable
constantly devising new ways to password manager can help.
access and exploit your valuable
personal and financial data. And, 4. Be Wi-Fi smart. At home, check
according to a recent RBC poll, your router’s settings and
there has been a significant surge passwords. On the go, be careful
in online fraud since the beginning how you use public internet (it’s
of the COVID-19 pandemic. More often not secure).
than one in five Canadians have
5. Arm yourself with information.
noticed more scam attempts, and
Stay up to date on current scams.
44% reported that they had received
Trending now: romance scams,
a call from someone claiming to be about you than ever before.
fake job offers and COVID-themed
from a reputable source, like a bank Mitigate your risk by guarding your
scams. Before you act, do a quick
or government, asking for personal or private data. Be careful where
web search or check government
financial information. you share your email address,
and law enforcement sites.
phone number and any personal
Fortunately, a few simple online information that could be used 6. Take a breath and slow down. Are
habits can help minimize risks for you for fraudulent purposes. Regularly you being asked to do something
and your loved ones: back up anything you can’t afford urgently? Stop and think before
to lose. you act. Scammers prey on
1. Take care with any email, text,
website or phone call. Scammers emotions like fear and loneliness.
3. Use complex passwords and
are becoming increasingly Listen to your gut if something
don’t reuse them for multiple
sophisticated – and everyone is feels off. And report any fraud
accounts, especially your
a target. Always think before you quickly to authorities.
financial and email accounts.
click on a link, open an attachment, Over one in three Canadians admit Visit rbc.com/cyber to learn more
respond to a text or provide to using the same password for about protecting yourself online.
information over the phone. The online banking as they use for
person at the other end may not other online accounts, and one
be who you think they are. in five have used easy-to-guess
passwords for eTransfers. Where
2. Protect your information. Data
it’s hard to remember multiple
breaches and social media allow
logins (e.g. shopping, news,
cyber criminals to know more
This information is not investment advice and should be used only in conjunction with a discussion with your RBC Dominion Securities Inc. Investment Advisor.
This will ensure that your own circumstances have been considered properly and that action is taken on the latest available information. The information
contained herein has been obtained from sources believed to be reliable at the time obtained but neither RBC Dominion Securities Inc. nor its employees, agents,
or information suppliers can guarantee its accuracy or completeness. This report is not and under no circumstances is to be construed as an offer to sell or the
solicitation of an offer to buy any securities. This report is furnished on the basis and understanding that neither RBC Dominion Securities Inc. nor its employees,
agents, or information suppliers is to be under any responsibility or liability whatsoever in respect thereof. The inventories of RBC Dominion Securities Inc. may
from time to time include securities mentioned herein. Using borrowed money to finance the purchase of securities involves greater risk than a purchase using
cash resources only. Should you borrow money to purchase securities, your responsibility to repay the loan as required by its terms remains the same even if
the value of the securities purchased declines. RBC Dominion Securities Inc.* and Royal Bank of Canada are separate corporate entities which are affiliated.
*Member-Canadian Investor Protection Fund. RBC Dominion Securities Inc. is a member company of RBC Wealth Management, a business segment of Royal Bank
of Canada. ® / ™ Trademark(s) of Royal Bank of Canada. Used under licence. © 2021 RBC Dominion Securities Inc. All rights reserved. 21_90081_1232
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