Lexicon Financial Group Weekly Update

Monday, March 7, 2022


This week's update is longer than usual and we thank you for your reading time.

 

Looking Back

Last week was a week to remember.

• Russia increased the intensity of its war on Ukraine as Vladimir Putin stated that Russia has no ill intentions. Negotiations for a peaceful resolution were not productive.

• Oil prices briefly spiked on Thursday to their highest level in nearly 14 years, as concerns about disruptions to Russia’s supplies continue. U.S. crude jumped 5.4% to $116.57 a barrel early Thursday. This is the highest trade since September 22, 2008. There are lineups in both Canada in the US as consumers scramble for the last few drops of “cheaper” gas.

Source: Oilprice.com

• The Bank of Canada increased the benchmark interest rate to 0.50%. This move is the beginning of what is a widely anticipated series of small rate hikes this year in an attempt to tame inflation.

 

Looking Around

On March 3, 2022, Citywire Canada published an article I wrote for financial professional that dealt with the topic of Ukraine. (2)

Canada has the second-largest Ukrainian population outside of Ukraine. Some 1.4 million Canadians claim full or partial Ukrainian origin – including me. I’m a third-generation Canadian and grew up in Winnipeg with grandparents whose first language was Ukrainian. The pain of this war, taking place more than 7,500 kilometres away, hits close to home. Over the past few days, I have had difficult conversations with individuals who have close family in Odessa and Kyiv, and who are looking to contribute financially to Ukraine’s forces and humanitarian organizations.

One individual shared a link to an international organization that has been operating out of Ukraine since 2014. They are well established, and full financial disclosure is published on their website. She has known about them for years, and decided to support them with a cash donation. On the surface, her decision may seem like the most logical way to support efforts in Ukraine, it was not necessarily the best move.

There are domestic agencies in Canada that are also raising funds to support Ukraine. Donating to a Canadian charity would entitle her to claim the Charitable Donations Tax Credit (up to 33%) on her income tax. Her decision to give is not tax-based but by doing this, she may be able to give even more to support the cause. Giving cash to an international organization over the internet does not confer this benefit.

Furthermore, tax-efficient gifts of appreciated securities can be processed quickly and efficiently. Clients may be more generous if they are able to give from a taxable account where the assets are not required immediately to fund daily living.

Unfortunately, the urgency of the need may compel generous Canadians to lead with their hearts and wallets instead of their heads. We can help clients by conducting the research necessary to make more informed giving decisions and help them avoid fraud. ABC News reported that in the aftermath of Hurricane Katrina, ‘The American Red Cross has asked the FBI to investigate at least 15 fake Web sites that are designed to look like legitimate Red Cross appeals for donations to Hurricane Katrina relief efforts.’

Ultimately, clients who decide to support charitable causes want to maximize the value of their donation. Giving cash ‘in the moment’ may seem like the right thing to do, but a moment of reflection may end up bringing more value to both the charity and to the donor.

If clients want to make a difference in Ukraine right now, we can help.

 

Looking Beyond

Markets, as you are aware, dislike uncertainty. The war in Ukraine is potentially a black swan event. It is an unpredictable event that is beyond what is normally expected of a situation and potentially has severe consequences.

Examples of these events include the crash of the U.S. housing market during the 2008 financial crisis, the dotcom bubble of 2001, and the emergence of the COVID-19 virus that caused a global pandemic in 2020 which disrupted markets and life as we know it around the world. These events are characterized by their extreme rarity, severe impact, and the widespread insistence they were obvious in hindsight. (3)

 

Further Reading

Markets & Investing – Raymond James

Welcome to March, Prepare for a Month of Surprises

China Faces Irreconcilable Choices on Ukraine

 

The opinions expressed are those of Craig Swistun and not necessarily those of Raymond James Investment Counsel which is a subsidiary of Raymond James Ltd. Statistics and factual data and other information presented are from sources believed to be reliable but their accuracy cannot be guaranteed. It is furnished on the basis and understanding that Raymond James is to be under no liability whatsoever in respect thereof. It is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. Raymond James advisors are not tax advisors and we recommend that clients seek independent advice from a professional advisor on tax-related matters.

 

  1. Talking War and Market Volatility With a Giant of Economics, Jeff Somer, The New York Times, March 3, 2022
  2. How to help clients who want to help Ukraine, Craig Swistun, Citywire Canada, March 3, 2022
  3. Black Swan, Gordon Scott, Investopedia, December 8, 2021

 

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