Attending a wealth management conference this past weekend, I had the opportunity to hear two (2) interesting economic forecasts from TD Bank and National Bank. Bottom line, there are many positives for both the U.S. and Canadian economies. For 2015, we are expected to be in year six (6) of a projected nine (9) year economic growth path after the 2008/2009 melt-down recession. Interest rates and inflation are expected to remain low, the Canadian prime lending rate of 3% should continue. The financial markets are projected to return combined gains/dividends in the range of 7.5% to 8.5% for balanced portfolio investments (similar to 2014 actual results, assuming stability continues to the end of this year). Based on supply and demand metrics in play, the housing market is not expected to ‘crash’ and residential real estate values are projected to increase by about 6% in the GTA (including Burlington and Hamilton).
The revitalization of the pronounced U.S. manufacturing and auto sectors will drive economic growth and stability in both the U.S. and Canada for 2015 and beyond. For example, consider that that U.S. plant & equipment capacity has now reached 79.2% in the U.S. and 82% in Canada, inducing pressure for new capital investment and plant expansion. Production of autos is expected to surpass 17 million units in the US (compared to 8 million units in 2008) responding to the demand for new vehicles to replace older vehicles with an average age of 11+ years (compared to about 8 years prior to 2009). With the low-interest environment and perception of job stability, consumers continue to ‘leverage ‘and purchase real estate and capital goods. The Canadian dollar is expected to fall to $.85 U.S. during 2015, providing exporters with significant advantage, however net importers will be challenged with this currency value shift.
The North American economy does not operate in a vacuum and both the European and Chinese economies need to be considered. Other than Germany, the European economy is near recession and unemployment remains high (for example, youth unemployment in both Spain and Greece is in excess of 50%). China is in the process of re-balancing its economy, with the objective of placing less reliance on exports, as a result the traditional annual economic growth factor of 10% is expected to reduce to only 6%.
A word of caution, the positive economic outlook for 2015 does not guarantee financial prosperity and success, of greater significance is your ability to properly ‘manage’ your own unique business. Set your goals and take the time to properly plan and execute your business strategy. Identify and pay attention to ‘business value drivers’ that will help strengthen your business. Also, do not forget about your own personal financial goals and planning, the success of your business is only one relevant component of a comprehensive plan for your family. For example, consider the importance of integrated tax optimization, estate planning, wealth management, business succession, retirement cash flow planning and financial risk management. Do not be overwhelmed, we are here to help and consult as your trusted advisor.