The leaves are once again turning brown so that must mean winter is coming. It has been a great summer in Winnipeg with good weather, good friends and a stunning lack of mosquitoes. You just never know how things are going to go.

Equity markets have been moving in a similar fashion. After the change in the White House a year ago and the rhetoric that has emerged from the Oval Office, the U.S. equity markets have continued to climb to record highs. While people focus on the noise emanating from the U.S., North Korea and Europe (Spain now), profit growth has been slowly building and the market rises with that profit growth.

Long-term market cycles 1925-2017

RBC Dominion Securities Inc.

Fall 2017

The Thompson Letter

Greg Thompson, CIM Vice-President & Portfolio Manager 204-982-3459 greg.thompson@rbc.com

Michael Romanow Associate Advisor 204-982-3989 michael.romanow@rbc.com

Meredith Milne Administrative Assistant 204-982-3932 meredith.milne@rbc.com RBC Dominion Securities 3100-201 Portage Ave.Winnipeg, MB R3B 3K6 Toll-free: 1-800-463-9775Fax: 204-982-2649 www.thompsonwealthmgmt.ca

Wealth management solutions Private investment management Retirement planning Estate and insurance planning

Continued on page 2

Chart courtesy of StockCharts.com and RBC Wealth Management; past performance does not guarantee future results

2 | RBC Dominion Securities

It has been said more than once that the market climbs a wall of worry. I strongly believe that. I become most worried when those around me are least concerned. What continues to have me cautiously confident in the longer-term upward movement in equity markets is that the global economy is just beginning to normalize after the Great Recession.

As the chart on page 1 points out, the markets have moved in very long cycles. It appears that the most recent cycle is just beginning. The global economic crash in 2008/09 took years to recover from. Only now are we starting to see Canada and the U.S. normalize interest rates (see the Summer 2017 Thompson Letter). This will be a slow and laborious effort on the part of central banks to raise interest rates. I expect them to err on the side of caution when considering each increase so as not to push the global economy back into recession.

Meanwhile businesses and governments are just beginning to get their feet underneath them once more. Global economic growth has just started to emerge and, as it takes hold, it snowballs.

It is healthy that people remain cautious. During these extended cycles there will be mini-cycles where markets are down months, quarters and even years. As the economy and profit growth ebb and flow, there is more ahead of us than behind us. It is my belief that you stay invested and maintain a diverse asset allocation

you can live with through the ups and downs, and use points of weakness to add great companies to your investment portfolio for the long run.

Cliché? You bet. But the market is built on clichés and that is unlikely to ever change.

Speaking about clichésWith many global markets reaching new highs over the past quarter, the headlines continue to highlight how expensive equity markets are and how this will never last. As I have written many times, speculators react to noise while investors stick to their long-term plan.

Since the bull market reignited, there has been plenty of noise. Much comes from the politics of the day but even more is generated by the media in search of a story – good, bad or otherwise.

Here are samples of the recent noisy headlines:

August 9, 2017: “Is the stock market a bubble?” (USA Today)

June 23, 2016: “Uh-oh. Is the stock market in a bubble again?” (CNN Money)

September 13, 2015: “Fears grow over US stock market bubble” (Financial Times)

May 6, 2014: “Time to worry about stock market bubbles” (New York Times)

December 2, 2013: ”Nobel prize winner warns of US stock market bubble” (CNBC)

March 27, 2012: “Robert Shiller eyes another tech bubble” (Yahoo! Finance)

May 3, 2011: “Why this stock market looks like the tech bubble of 2000 all over again” (Business Insider)

January 11, 2010: “US stocks surge back towards bubble territory” (Business Insider)

There is no doubt that we will once again live through market corrections. When it happens, the “I told you so” crowd members will have their moment. The “expert” commentator of the day will explain why this time it is different and markets are doomed for the next decade.

It is never different.

The smart investor will maintain their asset allocation, collect their dividends and use weakness as opportunity. They will shut out the noise and focus on a long-term plan in place to meet their financial goals.

If you need to talk through the noise at times, please do not hesitate to call.

Long term market cycles ... Continued from page 1

The Thompson Letter | 3

Long term market cycles ... Continued from page 1

A new proposed tax landscape for business owners

The greatest part of my job is that I get to meet many, many interesting clients. A large portion of these people are professionals or business owners who have spent many years honing their professional expertise or growing their businesses. Now, these individuals are facing some of the most significant proposed tax changes I have seen in my 30 years of working with investors.

The 2017 federal budget identified tax planning areas where the government feels that some owners of private corporations have gained unfair tax advantages. On July 18, 2017 Federal Minister of Finance, Bill Morneau, announced the release of a consultation paper and draft legislation to address the following issues:

• Income splitting

• Multiplication of the capital gains exemption

• Holding a passive investment portfolio inside a private corporation

• Converting a private corporation’s regular income into capital gains

The government sought input on its proposals up to October 2, 2017 and now we wait for the final legislation to be announced.

At this time, it is difficult for tax advisors to attempt to advise clients on proactive changes they may want to take because the government has not finalized the changes. What disappoints me so much is that business owners have put a lot of work – and money – into structuring an estate and wealth plan that allows them to grow their business. They now await a final decision on the tax changes.

This small business growth is the back bone of the Canadian economy. It creates new jobs and funds research

and technological advancement that make our lives better. Professionals go to school for years to earn their degrees and sacrifice a great deal of their early earning years to become proficient in their area of expertise.

If you have not spoken to your tax professionals on this subject, we encourage you to reach out to them to better understand the potential ramifications in your situation.

Once final legislation is announced, we will hold information events for affected business owners and their professionals.

4 | RBC Dominion Securities

This publication is not intended as nor does it constitute tax or legal advice. Readers should consult their own lawyer, accountant or other professional advisor when planning to implement a strategy. This information is not investment advice and should be used only in conjunction with a discussion with your RBC Dominion Securities Inc. Investment Advisor. This will ensure that your own circumstances have been considered properly and that action is taken on the latest available information. The information contained herein has been obtained from sources believed to be reliable at the time obtained but neither RBC Dominion Securities Inc. nor its employees, agents, or information suppliers can guarantee its accuracy or completeness. This report is not and under no circumstances is to be construed as an offer to sell or the solicitation of an offer to buy any securities. This report is furnished on the basis and understanding that neither RBC Dominion Securities Inc. nor its employees, agents, or information suppliers is to be under any responsibility or liability whatsoever in respect thereof. The inventories of RBC Dominion Securities Inc. may from time to time include securities mentioned herein. RBC Dominion Securities Inc.* and Royal Bank of Canada are separate corporate entities which are affiliated. *Member-Canadian Investor Protection Fund. RBC Dominion Securities Inc. is a member company of RBC Wealth Management, a business segment of Royal Bank of Canada. ® / TM Trademark(s) of Royal Bank of Canada. Used under licence. © 2017 RBC Dominion Securities Inc. All rights reserved.17_90783_NVB_010

Final notes and quotesBanks fuel global dividend growth. Global stock dividend payments rose to $447.50 in the second quarter, an increase of 5.4% from a year earlier, according to Bloomberg. This is in part thanks to strong dividend growth in the financial and information technology sectors. Bloomberg also cited “more synchronized” world economic growth as one of the main factors behind the solid rise in dividend payouts, which are forecast to reach a record of $1.21 trillion this year (up almost 4% from 2016). Financial companies accounted for half of worldwide dividend growth in the second quarter of this year, with payouts from banks soaring almost 9% to just under $60 billion. Regionally, emerging market dividends led the way with a 27.1% growth rate, compared to just under 5% for U.S. and European dividends ... Global economies have rarely been so in sync. For the first time since 2007, all 45 countries tracked by the OECD are on track to expand for the year, according to the Wall Street Journal, with 33 of them forecast to accelerate from a year ago, the most countries in acceleration mode since 2010. The OECD attributed the remarkable growth synchronization across major economies to a supportive environment of low-interest-rate stimulus from central banks and the gradual fading of rolling crises that had sapped growth in various regions, from the eurozone to emerging markets. The world economy has also benefited from a recovery from a global commodity correction that began in 2014. The outlook for the global economy remains fairly solid, with the International Monetary Fund projecting global economic output to accelerate to 3.6% in 2018 from 3.5% this year, compared with 3.2% growth in 2016 ... Despite their close proximity, South Koreans don’t seem too worried about the prospect of military conflict. A recent Gallup Korea poll revealed almost 60% of South Koreans don’t think another war will break out on the Korean peninsula, the second-highest share since the survey first began in 1992. For most South Koreans, daily worries such as jobs security and the economy are “what keep them up at night.”

Greg Thompson

The team and I once again competed in the Knowles Centre Charity Croquet Tournament. This is the same event that my team started to give back to the community and after five years of planning and organizing the event, we handed the reins over to Knowles Centre. It was great to see them grow the event. This year, there were five croquet courts and 20 teams, and the event raised $15,000. We are looking forward to finally putting our name on the trophy in next year’s tournament, on September 6, 2018.

Knowles Centre continues to score big!

Thompson Wealth Management Solutions of RBC Dominion Securities