The number of major store chains shutting down or downsizing is remarkable. One of the latest to fall is Toys “R” Us. Some may find consolation in the fact that one of the reasons for the crumbling of traditional brick-and-mortar stores—but by no means the only one—has been Amazon.com, Inc. (NASDAQ:AMZN). But the day could come when even this giant is slain.
The CAPE ratio (also known as Shiller P/E ratio) is a long term cyclically adjusted measure of equity valuations devised by the respected economist Robert Shiller. The CAPE ratio has been at historically high level for several years, although high valuations alone do not mean a crash is imminent. Whether US stock prices today are in a stock bubble or not is debatable. In general, bubbles do not necessarily imply a crash, unless there is a catalyst.
You have to pay ~2.5-4% in unavoidable ownership fees as an owner even with your mortgage paid off (property taxes, insurance, maintenance, amortized transaction costs, etc). Even if we’re generous and assume that’s just 2.5%, that means all that that equity is only making you 2.5% (1.5% in Vancouver) in rent savings. If you don’t have the equity, you have to pay more than than to borrow it from the bank (or take on the risk of paying more). If you do and you invest it, then that can be substantial savings.
Consider hiring a fee-only financial advisor to kick the tires on your portfolio and provide an independent perspective on your financial plan. In fact, it’s not uncommon for financial planners to have their own financial planner on their personal payroll for the same reason. An added bonus is knowing there’s someone to call to talk you through the tough times.
The big banks expect interest rates to continue to rise to between 2.25 per cent and 2.75 per cent by the end of 2019. And that will keep turning the screws on Canadians’ budgets, with more money going toward mortgage and other debt payments and less left as disposable income. Climbing rates will also continue to raise the bar for wannabe homeowners who to pass the federal mortgage stress test in order to qualify for a new mortgage.
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The cost of ownership in the most high priced markets is going up even more. Why? The limitation on the mortgage interest deduction to $750K and the limitation on the sales and property tax deduction to $10K. With the increase in interest rates, the partial non deductibility of interest and taxes, the overall cost of ownership is going up. Most people will feel the punch in their guts next year when they file the 2018 taxes. That is when most folks would realize what hit them was not a pleasant surprise!
"They're going to stop putting money into the stock market by that same function, and you're getting into the end of the year," Ader said. Pension funds for the S&P 1500 are now funded at an average of 91 percent for the first time in years. As many funds are legacy funds, strategists expect them to reduce risk because they want to secure their funding levels.
Toronto is a high value housing market similar to New York City or the Bay Area of California, and TO is a city destined to be a super city. It’s unlikely that a property purchase in Toronto will be a disappointment over the long run. If you see the Toronto home price charts, you’ll notice that prices have climbed in the last 18 months. So buyers have not lost their equity.
On November 8, 2016, Donald Trump was declared to have been elected as the 45th president of the United States. During the evening and night of the 8th and through the morning of the 9th, global financial markets lost a tremendous amount of value—at one point, US markets had lost a trillion dollars in one of the biggest crashes ever. While the overnight US markets showed big losses, even hitting the circuit breakers, the day of November 9 closed with the three major stock indexes up over a point each. It's too early to tell what this means in the long term.
Currently, the U.S. stock market is in the midst of one of the longest bull markets in its history. Since bottoming out in March 2009, the broad-based S&P 500 (INDEX: ^GSPC), led by a strong rally in technology stocks and other growth industries, has surged by more than 325%! Mind you, the stock market has historically returned 7% a year, inclusive of dividend reinvestment and adjusted for inflation. So, to say that things are going well right now would be an understatement.