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After starting the year off with a strong first week in 2021, Canadian stocks began running out of steam in the last week of January.
Investors are continuing to see high-growth tech stocks drive both the Canadian and U.S. stock markets. Growth investors are enjoying the gains, but they need to be wary of the stretched valuations.
The recent cool-off in the market could be the start of a larger much-needed pull back. If we do see a market correction within the month, I’ll be looking to add to some of my top growth positions if they go on sale. But in the meantime, I’ve got my eye on two more reasonably priced companies.
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Technology might have been the top sector in 2020, but the renewable energy sector wasn’t far behind. And for both sectors, I think we’ll see the growth continue through 2021.
Valuations of some of the high-flying tech stocks are getting rather high, raising concerns of a potential tech bubble. Whether or not that’s true, an eventual pullback in the tech sector should not come as a surprise.
Renewable energy stocks might not be able to match the growth levels that investors are seeing in the tech sector, but valuations are much more reasonable. In addition to attractive valuations, the long-term growth potential of the green energy sector has never seemed so evident.
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This year is the mid-point of phase one of the Canada Pension Plan (CPP) enhancements. It’s a crucial change for CPP pension users, as it affects paychecks again in 2021. The contribution amounts are higher due to the increase in contribution rates.
CPP users must note that the enhancements are in two phases. The first phase is from 2019 to 2023. Thus, expect higher contribution rates in the next two years. After this year’s increase, the employee and employer contribution rates are 5.7% and 5.95%.
Higher pay cut
As a result of the higher $3,166.45 maximum employee and employer contribution ($6,332,90 for self-employed), the annual Year’s Maximum Pensionable Earnings (YMPE) will also increase. From $58,700, it will now be $61,600. You can no longer make additional CPP contributions if your income is above the YMPE.