Frontlines

“After being trounced by New York—and Europe and Japan, for that matter—in 2013, Toronto stocks entered the year with less-stretched valuations and greater potential for earnings gains that will pay off in outperformance in the year ahead,” says Avery Shenfeld, chief economist at CIBC. The S&P/TSX Composite Index rose 9.6% in 2013 compared with the S&P 500’s spike of 29.6%.

One major reason for Canada’s lower earnings last year is the heavier weighting of resource equities on the Canadian stock index. The country’s resource sector is sensitive to ups and downs in the world economy, so “sluggish activity has held back demand, in a period in which supply was expanding in such areas as natural gas, oil and base metals,” Shenfeld explains.

However, CIBC expects that 2014 will be a good year for the global economy—the first since 2010 in which international economic expansion will surprise on the upside. CIBC forecasts a global growth rate of 4%. Historically, years in which global expansion ran at 4% or better produced big gains for the cyclically weighted S&P/TSX Composite Index, yielding median returns well above the S&P 500. The CIBC report predicts that the S&P/TSX Composite Index’s earnings growth will run at 13% this year, versus growth of about 7.5% for the S&P 500.

Yet some of these gains could be eroded by a further slide in the Canadian dollar in the short term. “The loonie is still vulnerable to another few months of the low inflation readings that have had the Bank of Canada talking more dovishly about future rate moves,” Shenfeld explains. “We’ll need to see more improvement in Canada’s trade position as the year progresses—and an uptick in inflation that quells dovish talk from the Bank of Canada—to put a floor under the loonie.”

Market Watch

Great-West Life recently introduced smartPATH 2.0, an interactive, customizable online resource designed to help employers better engage their staff when it comes to retirement planning and saving. The website is accessible from desktops, tablets and other mobile devices. Great-West Life says the platform was designed with behavioural finance and motivational theory in mind, providing information in a fashion that appeals to a wide range of learning styles and ages.

Vanguard announces the Vanguard Global Minimum Volatility Fund, an actively managed equity fund that aims to provide long-term capital appreciation with lower volatility relative to global equity markets. It is expected to invest about half of its assets in foreign company stocks, with the other half in U.S. company stocks, and to use forward currency contracts to hedge most of its non-U.S. positions to the U.S. dollar.

BMO Group Retirement Services (a part of BMO Global Asset Management) has launched an integrated cross-border retirement services platform. This initiative will allow BMO to manage the retirement plans of companies that have employees in both the U.S. and Canada so that these organizations can use one recordkeeper. Zoeller Company, the oldest independently owned sump pump manufacturer in the U.S., will be BMO’s first client on this platform.

Legal briefs

As part of its plan to improve DB pension plan regulation, Quebec foresees tabling two bills later this year. The first, to be tabled in the spring, deals with issues such as the duration of the restructuring period for DB plans. The second, to be tabled in the fall, focuses on elements such as the financing methods of DB plans. Both bills will be subject to public consultations.

Ontario is currently considering Bill 151, Strengthening and Improving Government Act, 2013, which contains amendments to the Pension Benefits Act. The goal of the amendments is to lift the uncertainty resulting from the 2012 Ontario Court of Appeal decision in Carrigan v. Carrigan Estate (Carrigan) about a spouse’s entitlement to pre-retirement death and survivor benefits. The amendments clarify how the definition of “spouse” can be applied when determining eligibility for these benefits. Plan administrators will still have to use the rules set out in Carrigan when determining eligibility for pre-retirement death benefits for members who died between Oct. 31, 2012 and the date that Bill 151 comes into force.

The Supreme Court of Canada recently released its judgment in IBM Canada Limited v. Waterman. The decision confirms that pension benefits serve as deferred compensation and savings for retirement— rather than income replacement—in the case of wrongful dismissal. The decision also confirms that the type of pension plan (DB or DC) doesn’t change the nature of pension benefits; they remain retirement savings and are therefore not deductible from damages payable for wrongful dismissal.

Source: Blake, Cassels & Graydon LLP

ROI of One Life Forum

May 13, 2014
Toronto Region Board of Trade
The Value of Prevention

The costs of chronic diseases and their impact on the workplace are increasing, causing employers to seek out simple, cost-effective ways to introduce prevention programs and engage employees in their health.

This half-day conference—which brings together plan sponsors and other stakeholders—will inspire employers to understand the benefits of a proactive approach to early detection versus reactive treatments, which can result in better patient outcomes and even save lives.

Find more information on this and other industry events at benefitscanada.com/conferences

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