Saturday, September 26, 2020

What Can I Invest In?

Asset Types and Registered Accounts

By Hanson Feng

Senior Business and Economics Columnist

Asset Types

DISCLAIMER: The information in this article is not provided by a certified financial advisor or financial planner. Returns expressed in this article are not guaranteed and The Written Revolution takes zero responsibility for lost capital. Please speak with a certified financial advisor, investment planner, or financial planner regarding products best fit for you.

I want to make money from money, what can I go for? For everyday investors, the main risk mitigation strategy is portfolio diversification and allocating your assets to reflect the stage in your life. There are no right answers for this, some people do this with the consultation of a financial advisor or investment advisor, others (like me) do it independently and bounce ideas off my peers. Another choice is to go hands-off with their investments by using professionally managed portfolio solutions through their bank or an investment firm like WealthSimple or Edward Jones. 

Get to know the Different Asset Classes

Let’s start off with understanding the different asset classes. The information below reflects Canadian banking, however, most countries offer similar or identical products under different names. Talk to your relationship manager today for more information. All interest rates are annualized. They’re listed in the order of riskiness:

Chequing and Savings Accounts: These have zero risks as they are insured by the Government of Canada (up to $100,000 per account) as long as your bank is under CDIC protection. Interest rates are annualized and paid out monthly, check with your bank if the interest is compounded daily or monthly. Remember a Chequing account is designed for spending, so no interest is accrued on the balance. 

  • Return: 0% to 1.0%

  • Risk: No risk

  • Pros: Liquidity with no risk

  • Cons: Low-interest rate

GIC – Guaranteed Income Certificate (or CD – Certificate of Deposit): These products are also guaranteed by the government of Canada under CDIC insurance. These products are when you borrow money to your bank and lock them in for a period of time. You cannot access this money. 

  • Return: 0.5% to 3.5% (depending on the BoC overnight lending rate)

  • Risk: No risk (CDIC insured)

  • Pros: Higher rate than most Bonds/T-Bills, safe

  • Cons: Low-interest rate

Everything below is considered a ‘security’ under American and Canadian legalization:

Money Market Funds: These are funds that are fully under ETFs and Mutual Funds but hold onto cash with a highly liquid nature. While these are not insured by the government, most funds have never had a negative year. Like RBC’s Canadian Money Market Fund (RBF271) has never had a negative balance since its inception. 

  • Return: 0.25% to 1.5%*

  • Risk: Very low risk

  • Pros: Liquid investment

  • Cons: Low-interest rate, same as most savings account

Bonds/ T-Bills: When you buy a bond, you’re buying ownership of debt. This makes you the payee of debt – there is corporate, government, and personal bonds. Government and corporate debt can be bought in single certificates, personal debt is usually bought through funds like ETFs and Mutual Funds like Mortgage-Backed Securities (mortgage debt) and Asset-Backed Securities (packages of consumer debt – lines of credit, credit cards, etc.). In all cases, the longer the maturity date of the bond, the higher the return. If this isn’t the case, it’s usually a sign of a looming recession. 

  • Return: 0.75% to 5.0%*

  • Risk: Low Risk

  • Pros: Low risk with a higher interest rate

  • Cons: Low-interest rate for the risk when compared to GICs

Mutual Funds and ETFs: Most people invested in the stock market are invested through these funds. There are two types; actively managed and passively managed. There are thousands of these funds out on the marketplace for investors, each with their own goals; Socially responsible investing, Large-Cap Stocks, mimicking the US stock market, technology fund, Canadian Equity, etc. These funds can be a collection of bonds, cash, derivatives, etc. Each fund has different goals and risk. Consult the fact sheet for information on performance, returns, and risk. 

Both Mutual Funds and ETFs charge some form of management fee and in some cases an MER. Actively managed funds typically charge between 1% to 3% of your entire balance, while passively managed funds charge between 0.05% to 0.5% of your entire balance. This means if you lose money, you are still charged. 

Check out your bank’s personal investment sites (these are sometimes referred to as “Global Asset Management”, Blackrock iShares, or Vanguard.)

  • Return: Varies on the fund and its contents

    • Balanced portfolios (diverse contents): 3% to 15%*

    • Bonds: 0.5% to 4%

    • Domestic Equity: -15% to 30%*

  • Risk: Varies on the fund and its contents

  • Pros: High exposure to large companies whose stocks are unaffordable like Tesla, have a portfolio professionally managed, and buy into certain funds that do risk mitigation for you (ex. an education 2030 fund will gradually move to less risky investments as it moves closer to 2030)

  • Cons: High management fees (depending on your deposit, you could be losing up to 6 digits over the course of 10 to 20 years)

Stocks and Equity/ Equity Security: The two names can be used interchangeably but refer to buying a portion of the company. You earn income either by receiving quarterly payouts call dividends (not all stocks offer these) and/or by selling the stock at a higher price. You have two options when buying stocks/equity; 

'Long position' is the most common purchase, you expect the company’s value to rise. If you’re ‘bullish’ you place long bets as you expect the market to rise. 

'Short position' is when you believe the price of the stock will decrease in value. If you’re ‘bearish’ you trade shorts as you expect markets to fall. 

Options are a contract that provide you with the right to purchase a stock at a certain price 

  • Return: -20% to 40%* 

  • Risk: Mid to High

  • Pros: High Returns with an average annualized return of about 7% to 10%* 

  • Cons: Can be high-risk dependant on the companies you purchase 

Want higher gains? Take on more risk

The General rule of thumb with asset allocation is the more equity a portfolio has, the more risk it holds. Risk should reflect your values and current goals. I personally do not intend on cashing out my investments for at least 5 to 10 years, hence why I can take on more risk. However, if I needed to retire within the next 3 to 5 years, I’d begin moving my investments to safer assets like cash, bonds, and GICs. 

For those who live in developed countries. Emerging country assets like stocks and bonds are always riskier than developed market bonds; an African ETF fund is far riskier than an American ETF fund in most cases. However, an African ETF fund has the potential to return far higher returns. 

Most investors (including myself) have a ‘model portfolio’ for asset allocation and industry allocation, this means the percentage of the money you place in each basket. So today my portfolio is; 

  • ~65% cash and equivalent investments

  • ~30% US Equity and Stocks 

  • ~10% Canadian Equity and Stocks

However, as I move money and place trades, I want to have a portfolio; 

  • 25% US Equity

  • 25% Canadian Equity

  • 25% International Equity

  • 20% GIC investments and Cash

  • 5% Fixed Income

This ‘model portfolio’ is what would be considered to be higher risk. For someone beginning to enter retirement, they’d begin to move their RRSP savings into more conservative asset classes like Fixed Income and GIC Investments. 

Most upper-middle-class Canadians don’t simply trade their time for money, they also make money from money. 

*Returns are not guaranteed and The Written Revolutions does not take legal responsibility for financial loss through these products. The financial institutions, wealth management companies, and mutual fund providers do not sponsor this post and are used for illustrative purposes only. Please consult with your financial advisor before making any financial decisions.

Types of Registered Accounts

DISCLAIMER: The information in this article is not provided by a certified financial advisor or financial planner. Returns expressed in this article are not guaranteed and The Written Revolution takes zero responsibility for lost capital. Please speak with a certified financial advisor, investment planner, or financial planner regarding products best fit for you. All taxation information, percentages, and numbers are for reference only, this information is not provided by a certified accountant. Please consult a certified accounting firm on tax deductions and deferral options before making any investment decisions in tax-deferred accounts.

I’m ready to invest but there are different types of investment holding accounts?! Let’s Talk Registered Accounts. In most countries when someone makes money from money, that income is taxed, typically at a lower rate. In Canada that’s called a capital gains tax, this is applied onto gains you receive on any investment from a financial institution when someone sells a non-primary residency and experiences a gain in value. In Canada, the capital gains tax is 50% of the gained amount. This is also how high-level management at big companies are compensated as they’re taxed less on their income. So, here’s a sample of numbers; 

  • You make $30,000 at work in Alberta, 

    • All $30,000 is taxable at the 25% rate

    • Making your average tax rate 15.67% 

    • Your take-home pay is just over $25,000

  • You make $30,000 through trades in the stock market in Alberta, 

    • Only $15,000 of the $30,000 is taxable at the 25% rate (and you’re not taxed in Alberta)

    • Making your average tax rate 0.89%

    • Your take-home pay is about $29,700  

You can avoid or defer capital gains taxes

Registered Accounts are a type of account that defers or avoids capital gains tax in a variety of ways. However, they have complex rules and fines/interest if these specific rules are not followed. Consult a tax advisor for more information. You can hold most types of securities, stocks, bonds, and funds in a registered account. 

Registered Educational Savings Account (RESP): This account is typically set up by an adult for a minor’s benefit (it does not need to be a guardian or parent). The contribution is tax-deferred with government contributions (AKA free money) through grants. When the beneficiary withdraws the money from the account, they’re taxed at their income level (typically very low). 

  • Contribution Scheme: Parent Contributions and government Contributions  

    • Canada Education Savings Grant: a match of 20% on the first $2,500 annually to a maximum of $500 a year and $7,200 per lifetime (source: RBC Royal Bank)

    • Canada Learning Bond: for low-income households, an initial $500 is contributed into the account with $100 paid every year until the age of 15 to a maximum lifetime benefit of $2,000 (Source: RBC Royal Bank)

    • Provincial government contributions: Select BC, Quebec, and Saskatchewan account holders qualify

  • Contribution Limit: $50,000 per lifetime

  • Restrictions: An RESP can only be open for 35 years, following that it must identify a new beneficiary or liquidate it into cash (minus taxes and grants) or transfer over to an RRSP (minus grants)

Tax-Free Savings Account: This account allows any person that is the age of the majority in their province to invest and not be charged capital gains tax. There are yearly contribution limits and all gains within a TFSA are tax-free. 

  • Contribution: Self-contributed

  • Contribution Limit: in 2019 a maximum of $6,000 can be deposited

  • Restrictions: You must be over 18 (or 19) to contribute 

Registered Retirement Savings Account: This is the most common type of registered account for Canadians. This account is designed for retirement (as in the name). You contribute to the account while you’re working and invest the money inside. The capital gains tax is not eliminated but deferred, in theory when you withdraw from the account once you retire your income will be lower, lowering the overall tax. When you contribute to an RRSP when you’re working and paying income tax, you receive tax benefits on contributing. 

  • Contribution: Maximum of 18% of income per year or $26,500 – whichever comes first. 

  • Contribution schemes: 

    • Spousal RRSP: a joint account with two partners

    • Employer contribution scheme: most employers contribute if not match dollar for dollar your contributions into the account

    • Transfer from other accounts: in some cases, you can transfer funds from other registered accounts into your RRSP, like from an RESP, pension plan, REIF, etc.

Defined Contribution Pension Plan (DC Pension): This is a pension set up by one’s employer. The DC pension plan is known as the less generous brother of the traditional pension plan. You and your employer decide on a contribution amount. The contributions are then invested in select funds at the pension plan holder (typically held by a financial institution that is separate from the company). You take on the investment risk in this pension plan and manage withdrawals. The benefit of a DC pension is you can take it from employer to employer rather than withdraw lump sum payments if you leave the company.

  • Contribution Scheme: Employee + employer contribution  

  • Contribution Limit: 9% of base pay

Defined Benefit Pension Plan (DB Pension): This is known as a more generous pension plan. It typically entails a pre-determined contribution scheme between the employee and employer. This money is collected from all employees and pooled. Off of a formula (typically off years of service and pensionable income), you receive a monthly payment for life. These are typically far more generous then DC pension plans and removes the investment risk from the induvial. However, if an organization is to collapse, legal battles have taken place for employees to claim their pension as the pension fund is not held individually but rather pooled into a group fund. 

  • Contribution Scheme: Employee + employer contribution  

    • In some cases, the employee contributes nothing to the fund. Example TD Canada Trust offers a fully employer-paid DB pension plan for all eligible employees. 

  • Contribution Limit: none

Registered Retirement Income Fund (RRIF): Once you turn 71, your RRSP account must be closed. So, most retirees withdraw their RRSP funds into an RRIF to mitigate tax obligations. The intention of an RRIF is to create a flow of income and is not designed as a savings or growth account, however, growth is tax-deferred. 

  • Contribution: From RRSP 

  • Restrictions: there are minimum withdrawal rates depending on age from an RRIF. The minimum withdrawal rate is 7.38% at the age of 71 and levels off at 20% at 94 (source: CIBC)

These are some of the more common registered accounts with LIRAs (for liquidated pension plans), LIFs (life income fund – same as LIRA), RLIFs (flexible LIRA), etc. all of which have their own purpose. It’s important to explore options to both invest while mitigating tax obligations. 

Tuesday, September 22, 2020

The Qatar Blockade

The Qatar Blockade, an Underdog Story

By: Mohamed Ahmed

On June 5th, 2017, Saudi Arabia, Bahrain, Egypt, and the United Arab Emirates imposed a land, sea, and air blockade against the small Gulf country of Qatar. These four countries, as well as a handful of others that joined later on, cut diplomatic and trade ties with Qatar, accusing them of supporting terrorism and having too close ties with Iran. Saudi Arabia went as far as to even expel Qatari camels. Three years later, there has seemingly been no progress towards a resolution. The United Nations International Court of Justice sided with Qatar in a racial discrimination case against The United Arab Emirates and many nations have called for an end to the blockade. However, to completely understand the conflict between these seemingly very similar nations, we need to understand their history.

The Gulf countries are generally considered the six countries around the Arabian Gulf; Saudi Arabia, The United Arab Emirates, Kuwait, Qatar, Oman, and Bahrain. In 1981, these six nations founded a political and economic alliance called the Gulf Cooperation Council, or the GCC. It was set up to support and protect their shared interests and similarities, which they have a lot of. The countries share common ground on many things like climate, landscape, language, religion, culture, and oil wealth. In fact, they even share the same heritage. The borders of the Gulf countries were drawn up relatively recently by the British and French governments who had colonized much of the area in the early 1910s. However, when they drew up the borders they did not take into account the tribes and people living in the region resulting in a separation of these tribes and families. The modern-day ruling families in these countries come from the tribes that prevailed and became the most powerful. Most notably, the House of Saud in Saudi Arabia, the Al Thani’s in Qatar, and the Al Nahyan in the UAE. Many of these families intermarried back when they were just tribes, so many of the ruling families are related in some way.

The House of Saud is regarded as the most powerful of the ruling families. They always saw themselves in the lead, and in many ways they were. Saudi Arabia is the largest, and most oil-rich of the six countries. It is home to Mecca and Medina, the two holiest Islamic sites. It also has the strongest relationship with the West, especially with the United States. In many ways, Saudi Arabia’s dominance amongst the GCC countries went unquestioned until 1995. This was when Sheikh Hamad bin Khalifa Al Thani staged a coup against his father and placed himself as the Emir of Qatar. He made many changes that transformed Qatar from a small nation whose economy mainly relied on pearl diving to a massive economic and political force in the region. He strengthened ties with Iran, Saudi Arabia’s greatest enemy, because they share a massive oil reserve. Qatar also launched a news network, Al Jazeera. This gave a voice to those who were often silenced by the governments of other GCC nations. Most notably, it gave a platform to members of the Muslim Brotherhood. As the perceived leaders of the Muslim world, Saudi Arabia views any other form of Islamist leadership as a threat to their leadership.

Then came the 2011 Arab Spring. A series of pro-democracy uprisings throughout the Middle East and North Africa which toppled many tyrannical regimes. Much of the Spring was covered by Al Jazeera. This coverage gave a voice to the voiceless and projected these voices all across the Middle East and reached global audiences. After the collapse of the Mubarak regime in Egypt, the Saudis became incredibly wary of the power that Al Jazeera and Qatar had. They feared that what had happened in Egypt would inspire their people to do the same. After Egypt’s revolution, elections were held and President Mohamed Morsi was elected. Morsi was the first democratically elected president of Egypt and was a member of the Muslim Brotherhood. A year into his presidency he was removed in a military coup. This was followed by a military crackdown that resulted in the deaths of hundreds of members of the Muslim Brotherhood and the imprisonment of even more. This was all covered on Al Jazeera. Qatar welcomed those who fled from Egypt, many of whom were affiliated with the Muslim Brotherhood and were considered terrorists by high ranking Egyptian military officials. 

From all of this information on the history of this feud among the Gulf countries, it is clear that tensions between Qatar and its neighbours are high for more than just one reason. The countries blockading against Qatar have a list of thirteen demands. The main three require the downgrading of diplomatic ties with Iran, the shutting down of Al Jazeera, and requires Qatar sever ties with terrorist groups. Qatar maintains that it does not support terrorism and refuses to act upon any of their demands, claiming that the blockading nations are infringing on their sovereignty. The blockade did initially have negative effects on the Qatari economy but it did bounce back as a result of actions taken by the government such as providing loans to banks, trading more with Iran and Turkey, and manufacturing goods locally as they could no longer rely heavily on imports.

Qatar continues to thrive despite the blockade, it has the highest GDP per capita in the world and will be hosting the 2022 FIFA World Cup. As the blockade goes into its third year, it is clear that these two opposing sides are at a standstill. One side is a small nation, ruthlessly fighting for power and influence in the region. Taking steps like expanding its economy, building one of the largest international news networks, and harbouring those fleeing unjust persecution from neighbouring countries. The other side is a group of large nations, trying to protect the status quo in the region in order to keep power in the hands of the Saudis. It is unclear which side will prevail, but it is clear that this blockade has not gone the way that the four blockading countries were intending for it to go.


Why border lines drawn with a ruler in WW1 still rock the Middle East

Understanding the blockade against Qatar

The Qatar Blockade | Start Here

US envoy in Qatar: Gulf dispute ‘gone on too long’

Sunday, September 20, 2020

Global Economy Six Months Into The Pandemic

 A Global Economic Snapshot 6 months into a Pandemic

Hanson Feng

Senior Columnist, Business and Economic 


This week marked the six-month mark of the World Health Organization declaring a Pandemic as COVID-19 took a chokehold of the global economy as they were shut down. As each region and country took different measures, we now look at how their response to COVID-19 tolled their economy. 

Equity Markets across the board have seen

Rapid V-Shaped Recovery Patterns

The US Fed has gone on a no-limit buying spree of bonds and mortgage-backed securities. This has propped up global equity markets as global market indices have seen strong accelerated growth, in some cases straight-line growth over the last 4 months. While on paper this may look great, many believe it’s the start of a market bubble as equities are far over-valued. However, last week the market saw pull-back with market corrections of ~10%, primary in tech stocks after their triple-digit percentage growth since mid-March. 

It is important to note that certain industries and sectors are seeing accelerated growth patterns, specifically in the technology and the e-commerce space as investors put bets on work from home and online education. This contrasts mass-layoffs and struggling rebounds for travel-related stocks. Finance has also seen a particularly hard time as they struggle to return to their pre-COVID prices due to losses on consumer loans, mortgages, and falling interest rates. 

These markets are a direct result of high government involvement that many views as an artificial way to prop up the stock market. This propping us has led to investors to presume a strong return to the economy. Many say this has led to dangerous levels of overpricing and could lead to a market crash as EPS and P/E ratios currently mirror those prior to the 01’ and 08’ crash. We can see this pattern extend as over the last two weeks the market has seen pullback as it begins to correct. Time will tell if this is a healthy market correction and pullback or a crash as it responds on mass overpricing. 

The drastic increase in stock prices is also caused to a new injection of capital from young investors as they take advantage of low price, direct government aid in the form of stimulus cheques/ CERB, and easy access to commission-free mobile trading. With an almost 50% increase in year over year brokerage account opening, these new injections into the market pose no surprise to a rise in stocks. This trend has been noticed by bankers and traders on Wall Street as they are paying attention to threads on Reddit and social media pages on the next move (Bloomberg Business Week). This has also reflected in trading memes claiming the September correction was caused by all the “teenage traders going back to school.” 

Paired with new investors, comes with more risk within the market. Alex Kearns, a college student like many opened a new trading account as blue-chip stocks reached all-time lows. Taking on risky options trading, his Robinhood trading account posted a $730,165 USD loss. The then 22-year-old jumped to his death. This has prompted lawsuits over the app’s design, described as “game-like.”


Less Debt has lead to a Safer Economy

Many banks put aside billions of dollars in preparing for losses on loans, mortgages, and payments. In a Bloomberg report the Bank of Nova Scotia (Scotiabank) has released data that mortgages that have had deferral expiration, 99% of mortgage payers are meeting their monthly obligations as they pivot back to payments. 

Canada’s largest lender RBC has experienced similar numbers and is confident as they see the majority of their mortgages held by high credit costumers (FICO scores of over 750) with dual incomes. Barclay’s Bolger adding “We’re not looking at seeing a big spike in foreclosures.”

Governments that have instituted strong direct consumer fiscal stimulation have seen a drop in personal debt (credit cards, lines of credit, etc.). In Canada, we saw those ages 18 to 45 see debt drop by 0.65% to 1% as CERB, CRSB, and other measures allowed them to pay down debt. Similarly, those aged 65+ saw one-time tax-free payment via OAS and the Guaranteed Income supplement allowed for a 0.45% shrinkage to their debt. 

In unprecedented times like these, seeing debt be held by highly rated customers and reduced as a whole is comforting and provides certainty. As we continue the outlook, the lowered personal debt should absorb more shockwaves if a second round of layoffs should occur. If we don’t see a significant reduction in debt at the personal level, we would see an economic catastrophe. A global pandemic resulting in slowdowns of global trade + a consumer debt crisis + equity market crash + business shutdowns + rise in insolvencies would bring the economy to its knees.   

Consumers have a lot of power

In the states, 70% of the economy is composed of consumer spending. This rate is far higher in developing economies. I wrote an article about the importance of consumer spending in order to spur the economy in a downturn (check it out here). This is key to allowing for a return to normality, as consumer spending puts more people back onto the payroll. 

What this means for the Middle Class

As we begin to see economies reopen, we’ll see the slow recovery for the middle and lower-middle class. 

For service and hospitality workers, it will mean the slow progression of back to work. However, data collected by yelp quotes the majority of temporary restaurant closures in the US have resulted in permanent closures as governments were slow with a stimulus to small businesses as they bled cash through the first months of the pandemic. This will result in a slow back to work return for these workers, typically the lowest paid and most economically vulnerable in developed economies. During this duration, we may see spikes in government support programs like food stamps, unemployment, and welfare. The only viable solution to this is a domestic investment for new low-skilled jobs to see a boost in employment for these workers. 

For middle-income workers that work in industrials and manufacturing, economic data has shown a swift return to pre-COVID numbers for industrial output. In the foreseeable future, I project that developed economies will see substantial growth to industrials and manufacturing due to hampered global trade. 

Middle to upper-middle-income white-collar workers have seen little repercussions from a financial perspective as a result of the pandemic. While those working in sectors such as travel and energy have seen layoffs, the vast majority of white-collar employees have seen little change to their finances. Many have experienced a surplus as consumer spending was hampered when economies were shut down in March. The main concern for this income group is their long-term retirement savings and 401K/ Direct Contribution Pension Plans. Increased volatility in this duration of time may lead to later retirement and delaying big financial goals. 

As Generation Z begin to enter the workforce, COVID-19 will present challenges. In 2008, many baby boomers opted to delay retirement due to layoffs and market volatility impacting their pension plans. I project a similar occurrence to occur as we enter the next 3 to 5 years as we continue to see market volatility, corporate bankruptcy, and reduced earnings. This may impact the overall earning potential for young adults entering the workforce, decrease the return on investment (ROI) on university degrees as new grads graduate with five to six figures in student debt, possible delayed retirement, homeownership, and stalled career development. 

For those graduating during or shortly after a recession, the national bureau of economic research projects a 9% reduction in initial earnings, halving within 5 years, with the gap disappearing at about 10 years. 

Developing Markets See Shockwaves and recessions, the first in decades. 

Yasuyuki Sawada, Chief Economist of the Asian Development Bank (ADB) announced on September 15 that they’re analysts have downgraded projections for the Asia area from growth of 0.1% to seeing a contraction of the greater Asia economy by 0.7%. With projections of an L or ‘Nike logo’ shaped recover, ADB is projecting a 6.8% growth to Asia’s economy by 2021. 

More certainly, some nations will hurt more than others in the Asia area. Projections have an expectation of India’s economy to shrink by 9% by the end of 2020, while China is projected to grow close to 2% by the end of the year. Countries with tourism-focused economies could see up to a 20% shrink like the Maldives and Fiji. 

African nations are seeing headwinds as they see tanking of GDP numbers as COVID-19 disseminated its economy. With an overall projection of an 8% GDP contraction across the continent, the UN has addressed that due to lack of social services a major issue. There are growing possibilities of almost 1/3 of Africa’s middle class exiting the income bracket due to COVID-19. With this, some economists believe it may take years for certain African countries to recover from the Economic blow from COVID-19. Momentum Investments quoting the South African Economy may not fully recovery until 2023-24. 

However, analysts still believe that there are strong investment opportunities in African countries with its large pool of up and coming talent for the workforce, growing middle class, and strong fiscal growth following recovery from COVID-19. 

Middle East is Hurting as Oil Dips

Over the past decades, the Middle East has been clouted for its low tax rates for corporations and individuals as they raked in oil royalties as oil prices hit all-time highs. Analysts at British Petroleum (BP) are now projecting that the world may never consume as much oil as they did in 2019. These projections paired with the ease of access to renewable energy solutions may be the death of the low-tax economic structure set-up in many middle eastern countries.

However, as ex-pats and foreign workers leave middle eastern countries, the job-market can be re-designed from bottom up in order to support locals. Before the pandemic, roughly 9% of Saudi Arabia’s workforce was made of foreign workers with over 200,000 leaving the nation as COVID-19 spread around the world. These pockets of work should generate and spur growth, however not to the same levels when compared to the hay day of oil. As of now, the unemployment rate in Saudi Arabia is half of what it is in the states, but many economists point to raising tax rates in order to avoid mounting sovereign debt. 

2020 Election Adds More Volatility 

Every election analyst calls it “unprecedented” and “unlike any other.” 

This year we’ll see a variety of impacts on the market and economy, globally. Blackrock Chief-Income Strategist Scott Thiel says the US election will pose a trio of volatility risks; 

  1. The election itself and the very different views of the two candidates; 

  2. The way the election is administered – mail-in ballots; and 

  3. The overall transition in power. 

For the last half-century, the stock market has predicted every single election outcome. If the 90-days prior to the election the market closes green, the current president is to be re-elected. If the closing balance closes negative, a new presidential candidate will be elected into office. This year you’re looking at the range between August 5 and November 3. At the time of writing, the market is at a 0.88% growth for the period. Currently, the S&P 500 is on the support line from September 8. Under the Support and resistance line strategy, the market should see an upward pattern. 

As we begin to see an end near in sight, our economies will need to begin to recover. The way we recover, the rate we recover at, and the overall recovery process will have a massive impact on the global economy operates in the next decade. 

Alike the way I close every email. Stay safe and healthy. 


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