Plus: Canadian homes now only laughably expensive! January 23, 2023 Made in Canada IN THIS ISSUE Estimated read time: 8 mins 💰 Mo’ money 🍄 Spore problems 🏠 Mortgages! Alberta was (easily? 😁) turned into a post-apocalyptic wasteland to film HBO’s “The Last of Us.” For more on the show’s huge debut, see below. | HBO THE WEEK IN MARKETS The Relief Rally Rolls On, For Now The biggest news of the week? The 2023 relief rally hasn’t fizzled. The S&P 500 and TSX are now up about 5% on the year, and bonds have risen. Which means 60/40 portfolios — the classic but recently beleaguered mix of stocks and bonds — are up 4% since Jan 1. More speculative assets, which tend to do worse when things are down but better when things are rosy, have bounced back even higher: the ARK Innovation fund is up 19% since late 2022, and bitcoin and ether have climbed around 35% from their recent lows. Why the happy faces? The latest inflation data has investors thinking that a so-called soft landing isn’t out of reach. A slew of major companies are expected to release earnings reports this week, though, so we’ll see if the rally can survive the news. SMART CHART Good news! Paycheques are growing faster than prices. Inflation outpaced wages throughout 2021. But (bright spot!) that trend reversed beginning last summer. WHAT HAPPENED LAST WEEK IMPORTANT Canadian home prices fall from “completely unaffordable” to “laughably expensive.” Since February, the average price of a property dropped by 13.2%, to $730,600 — the biggest decrease ever recorded! There’s a catch, of course: prices fell because demand fell, and demand fell because mortgage rates (and thus the cost of owning a home) shot right through the recently reshingled roof. One reason to keep that open house on your calendar? Many expect mortgage rates to plateau or even fall from here. Investors are making eyes at European stocks. Bank of America asked 300 big-time fund managers to stop counting their money long enough to take a survey. The main takeaway? At least 39% of them are holding fewer American stocks in favour of European securities and emerging markets — where they see greater value. It’s a reason to watch foreign stocks, but if the U.S. market starts to outperform, that money could shift right back and cause a rally. Canada took a big step toward the financial part of reconciliation. On Saturday, officials announced Ottawa has agreed topay $2.8 billion to 325 First Nations to settle a class-action lawsuit over centuries of cultural genocide perpetrated by residential schools. INTERESTING They’re cuckoo for Super Puffs. Vancouver-based clothing brand Aritzia — best known for its ubiquitous puffer and a royal fan — announced a 38% increase in quarterly revenue. But the biggest news was its annual U.S. sales, which surged 78% to $1 billion, topping Canadian sales for the first time. It’s another example of companies succeeding by making good products, even in tough times. The biggest Canadian TV production ever had HBO Max’s second-biggest debut in 13 years. With 4.7 million viewers, the first episode of the climate-fuelled-apocalypse drama The Last of Us trounced every recent premiere except for House of the Dragon — and has way easier character names to remember. Investors and analysts are finding something to love too: after underperforming, the stock for HBOMax’s parent, Warner Bros. Discovery, is up by more than 35% this year. It’s time to spin the Crypto Implosion of the Week Wheel! Where it stops, nobody — oh, fine, you guessed it: it’s Genesis, the crypto lender that filed for bankruptcy Thursday, thanks in large part to the $234 million it had tied up in FTX and some Winklevii-alleged accounting malfeasance. FROM OUR SPONSOR Weekly draws from Jan. 23 to Feb. 13. Three prizes of $30,780 and seven prizes of $6,500. Must be new or existing Wealthsimple client. Make a deposit or transfer of at least $1 or essay method to enter. Each dollar deposited will earn one entry. No purch nec. Canadian residents and age of majority+ only. STQ required. Full rules wsim.co/maxout. THE FOMO INDEX by Stacey Woods IMPORTANT 🍺 Canada’s new alcohol guidelines suggest two drinks a week, max. Not counting beers, though, right? Source 🤖 New AI app lets you have fake chats with Hitler, Pol Pot. Or you could just get a hobby or something. Source 🐟 TikTok trend sends canned-fish sales up by 10%. Potted meat anxiously awaits its turn. Source 🐦 That’s good, at least: Twitter revokes blue check marks bought by Taliban accounts. Source CRASH & BURN TO THE MOON 🔥 Tinder tests a $670-a-month tier for those who want to be single and broke. Source 🐗 The population of savage wild boars roaming Canada explodes. Could be disastrous or delicious. Too soon to tell. Source 👗 Privacy fans: new clothing line uses patterns to make you invisible to facial-recognition software but, sadly, visible to everyone else. Source 🍃 Study shows “budtender” was third-fastest growing job title in Canada last year because “bong rip engineer” wasn’t on there. Source WHO CARES WHAT’S UP THIS WEEK Tech week is upon us (Tuesday - Wednesday). Microsoft, Tesla, and IBM report earnings. Tiff week too (Wednesday). The Bank of Canada announces its next rate hike — and maybe its last for a while? THE BIG IMPORTANT STORY PERSONAL FINANCE A Recession Is (Probably!) (Maybe!) Coming. Brace Yourself. The recession alarm bells are ringing loudly. But don’t worry! The recession won’t hit until later this year. Actually, just kidding — it’s here now, and it’s about to get big. Or maybe it won’t be so bad. The truth is that, though no one knows how bad a possible recession might be, it’s looking very, very likely that we’ll experience one soon. Which means it’s a good time to figure out (1) what a recession actually is and (2) how you can prepare. Because if you take a few steps now, you’ll probably do a lot less hiding under the bed later. Recession = GDP ⬇️ Unemployment ⬆️ The economy typically enters a recession whenever gross domestic product, or GDP (a measure of the country’s economic activity), declines for two consecutive quarters. But, crucially, economists also look at payroll data and industrial sales numbers before officially declaring a recession has hit. Over the past 50 years, Canada has experienced six recessions, each lasting between three and nine months. Historically, GDP drops an average of 3% during such downturns, while the unemployment rate rises by about 3%. In real terms today, a 3% spike in unemployment would mean an additional 518,000 Canadians would be out of work. Which is a lot! But the unemployment rate ticked up only by about a point during the ’74–’75 recession, and even less than that during the 1980 downturn. So let’s all hope for an equally soft landing. Recessions affect a lot more than jobs, though. Get this: Birth rates typically drop, hard. One study found that, thanks to the Great Recession, Americans gave birth to 2.3 million fewer babies than expected from 2008 to 2013. Canada’s birth rate dropped similarly and remains down 17% since 2008. And declining birth rates can have major economic consequences. Death rates globally rose by as much as 4.5% in emerging and developing nations during recessions between 1961 and 2018, owing to increased stress, reduced access to medical care, and other factors. (Developed nations, like Canada, saw smaller increases.) Young workers tend to earn less money when they enter the workforce during a recession and can struggle to catch up. Today, millennials who began working during the Great Recession hold a staggering 41% less wealth than adults of similar ages did in 1989. Last but grossest: men’s underwear sales suffer. Apparently, guys just stop replacing their tighty-whities when money is, uh, tight. How to get ready for rocky times Always good advice but especially now: everyone should try to sock away an emergency fund (in a savings account or some such) with between three and six months of living expenses. If, God forbid, you were to lose your job, you don’t want to have to take on debt. Here are three more money tips to get ready: Pay down your debt. We covered this topic recently, but the most important thing is getting rid of your existing high-interest credit-card debt: it’s a financial albatross. No more keeping up with the Joneses. Saving isn’t easy, especially when your friends are #livingitup or whatever. But trust us: either your friend Madison’s parents paid for that ski trip to Banff or, just as likely, she’s drowning in credit-card debt, which is a big problem in Canada. Don’t stop believing investing. Here’s one recession silver lining: stocks and other assets tend to fall during recessions, but people who keep investing stand to reap serious rewards. That’s because, if the past is any indication, once central bankers cut interest rates, the economy will likely take off again, creating opportunities for big investment returns, strong wage growth, and all sorts of other good stuff. Hang tight in the meantime. —Sarah Rieger OTHER VERY GOOD READS 💰 The Getty Family’s Trust Issues* Inside a secretive dynasty | The New Yorker 🚫 Avoid Scams Targeting Your Account Tips to help protect your money | Wealthsimple 🚗 Elon Musk’s Appetite for Destruction* What can Tesla’s blind spots teach us about the CEO? | The New York Times *Article is paywalled, which, yeah, is kind of annoying. But we think good journalism is worth paying for. SHARE TLDR WITH FRIENDS 🤝 Put this link in your group chats, in your Slack threads, on a tattoo on your back — whatever works for you! THE WISDOM OF TWITTER Glassdoor: where grunts get even. THOUGHTS ON TODAY’S ISSUE? Love it Good So so This week’s newsletter contributors: Brennan Doherty (writer), Devin Gordon (writer), Stacey Woods (writer), Sarah Rieger (news writer), Ambrose Martos (fact checker), Ciara Rickard (copy editor), Sara Black McCulloch (fact checker), Jared Sullivan (senior editor), Peter Martin (senior editor), Kat Angus (managing editor), and Devin Friedman (editor-in-chief). Wealthsimple Media Inc. 80 Spadina Ave Suite 400 Toronto, ON, M5V 2J4 Replies to this email address are not monitored. Have questions? Visit our Help Centre or submit a request to our Client Support team. PRIVACY POLICY UNSUBSCRIBE TLDR is offered by Wealthsimple Media Inc. and is for informational purposes only. 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