Hanging it up

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By Guest Blogger Scott Booth

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What a ride 2025 has been so far.

For all the drama and negativity out there in the news…things are going swimmingly from an investment perspective. B&D Portfolios are making strong headway YTD. International equities led the way early in the year, but an increasing probability of the Federal Reserve (the Fed) shifting out of neutral and cutting rates a bit, combined with strong Q2 earnings (looking like a third consecutive quarter of double-digit growth) seem to be giving resurgent U.S. equities a lift of late. The Canadian market is chugging along just fine too.

I’m not sure many had that on their Bingo card to start the year.

As the Fed grapples with immense political pressure to cut rates, it is balancing a weakening U.S. Labour market with an anticipated tariff-driven move higher in prices. Given a dual mandate of maximizing employment and keeping inflation in check…that puts them in a bit of a pickle…as these factors seem poised to pull in opposite directions.

United States Non-Farm Payrolls

The latest employment data form the Bureau of Labor and Statistics (BLS) led to an “Apprentice” moment as BLS Commissioner Erika McEntarfer was unceremoniously dismissed in their wake, raising concerns about U.S. data credibility and independence.

The American president’s favourite Federal Reserve official, Chairman Jerome Powell will speak today at a conference in Jackson Hole in front of a cadre of global central bankers. Tariffs, jobs, inflation and the importance of an independent Federal Reserve will likely be the focus of his address. It will be his last appearance at the conference, as his tenor at the helm of the world’s most influential central bank ends in May of 2026.

DJT would like him to pack in sooner…but “YOU’RE FIRED” isn’t an option here.

As Powell prepares to depart the Fed and move on to the next chapter in his life, the future, as always, is uncertain.

Inevitably, some ways down the road, with unknow timing or origin, some wrench will get thrown in the works, markets will get upset, volatility will spike, and the doomsayers will pontificate that the world is soon to end.

Maybe this time the wrench is orange with tiny hands.

Regular readers know the best course, when that tempest arrives, is switch off BNN, ignore the noise, walk your dog and carry on with your plan.

This can be a difficult thing to do when contemplating retirement.

In recent conversations with clients on the cusp of hanging up their work shoes, there has been trepidation about the prospect of starting to draw on their portfolios at the wrong time, with all the uncertainty in the world.

Provided one is in a position where they have built up a sufficient asset base to support income needs through a sustainably draw on their portfolio…somewhere around 5% per year, they need not be too concerned about market gyrations. There is no wrong time. Retirement plans are long term. Markets are resilient. Things cycle around.

Properly constructed portfolios contain assets that aren’t all correlated with one and other. Phrased a different way, a well-diversified portfolio should include exposure to assets whose prices are expected move in different directions at any given time.

By building out an investments that include a handful of globally diversified equity ETF exposures, as well as ETFs with a variety of different fixed income holdings (Preferred Shares and both Corporate and Government Bonds of varying credit quality and terms to maturity), one can greatly increase the likely hood that, whatever storm brews and whatever turmoil markets endure, at any given time, there is some asset in your portfolio that is stable and holding up well.

Happiness is always having something to sell

If equities are surging and bonds are suffering…sell the stocks if you need to raise money. If risk aversion surges and the S&P 500 is taking in on the chin, investors are likely flocking to the safe haven of government bonds…so sell those if you need cash. The goal is to always have something in the portfolio that is saleable at fair and full value if liquidity needs to be created to fund this month’s income distribution.

Having a portfolio with building blocks that behave differently from one and other can greatly improve the likelihood of not having to sell any asset at a bad time and that helps with the prospects for recovery.

When it comes time to start withdrawing from an investment portfolio to fund retirement it typically makes sense to start with funds in non-registered and tax-free savings accounts before withdrawing from registered savings plans like RRSPs. This defers the taxes that would result from RRSP withdrawals for as long as possible.

Retirees 65 or older, without pensions and funding income needs outside their RRSP should look at converting some of their RRSP to a RRIF as the first $2,000 withdrawn annually from a RRIF is eligible for a pension income federal tax credit of 15%. Withdrawals from RRSPs are not eligible for the tax credit so to qualify you must open and withdraw from a RRIF. Better in your hands than in those of the kind folks at the CRA.

Every situation is different, but if you’ve got the assets, a well-planned strategy and a thoughtfully constructed portfolio, one shouldn’t let apprehension about current events and the state of the world stand in the way of the decision to hang ‘em up.

Scott Booth, CFA, is a seasoned financial advisor and licensed portfolio manager. Over the past 18 years he has worked in the capital markets as an analyst, trader and advisor with major banks and now with Turner Investments.

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About the picture: “Thanks for all your hard work with the blog,” writes Rob. “I’ve been following you daily for years now. Times are a bit uncertain at the moment but you still seem to hit the nail on the head with your comments. I have attached a picture of a different type of beast, our miniature donkey Rufus. He’s a real escape artist and is able to open all manner of gates and barn doors (to steal treats). We attached a GPS to him once and found he’d wandered for miles. Hope you like the pic.

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.

Source: https://www.greaterfool.ca/2025/08/22/hanging-it-up/