Hello

After numerous conversations and attempts of send the link to my website, the over whelming response is that you like to be sent the actual email and if you want to see it again, you can access the link later.

Hello All!

Well – what a week it’s been. Even though every day is still Tuesday, there is quite a bit to process.

The RRSP deadline (thanks to those who made their contributions in time), TFSA questions, tax preparedness…

But most conversations we had centred on bitcoin at first, but also inflation and then, what the heck is going on with the markets and bonds??

Let me summarize the most pressing thing on everyone’s mind.

What’s happening in the markets?

The short answer is that they are taking a much-needed breather.

The long answer is, remember where you are.

The news cycle is dominated by short-term happenings – no one wants to know how many planes landed safely in a day… they tend to focus on the negative and the sensational.

Together, we have built a portfolio that, through good communication, solid processes and a strategy based on your objectives, risk and time horizons, should be able to weather any market, today and tomorrow.

To quote our technical analyst Bob Dickey,

The huge amount of information we deal with has the tendency to make us forget where we are in the longer-term market cycle that has been one of the very best places for creating and growing wealth over a very long period of time…

Long-term secular bull trends tend to last until the sentiment of the public and investors reaches very optimistic levels of “euphoria” and “irrational exuberance” that are very much still missing in today’s environment. We see the current secular bull period that began in 2009 as being at about the halfway point now with possibly some of the best market years still ahead of us.

In short, call me if you have any concerns regarding your portfolio or investments.

I keep hearing that inflation is coming and I should watch out…

Here are my two cents: Inflation raises all ships. But what is it, really?

Inflation is the decline of purchasing power over time. In English, that means our dollar buys less.

Inflation can occur when prices rise because of increases in production costs, such as the cost of raw materials, wages and transportation.

Ahh, so that’s why everyone’s running to commodities and out of bonds and tech

The answer isn’t that simple, but it’s in there somewhere.

US Federal Reserve Chair Jerome Powell and Bank of Canada Chair Tiff Macklem have both said on record that their banks will remain accommodative and keep interest rates low for as long as possible. Again, I think the market needed to take a breather.

In the short term, the rise in commodities and transportation costs can be significant (because of supply chain disruptions), but these are temporary and don’t happen every year, which is what we need for a real inflationary cycle. In the short term, commodities are rising. But for how long?

But there is more to it than just commodities and supply chains, right?

Yes, and those higher prices will eventually be passed on to the consumer. But unemployment has made the labour market tighter (and there will be more unemployment) and therefore, there can’t be any real pressure to increase the prices of goods in the long term, especially when you include what automation and technology have already done and will continue to do to production costs.

In the wake of past widespread medical scares (such as the SARS epidemic and the MERS outbreak more recently) or even recessions, private-sector savings get rebuilt quickly because of government intervention. An aging population and a potentially higher-than-average savings rate are also going to dampen demand growth overall.

On top of that, we are seeing people and institutional investors starting to deleverage. This, plus a decline in borrowing, will slow the “velocity of money” and make it harder for inflation to rise. Perhaps this deleveraging explains why both bond and equity markets have gone down recently.

As economic researcher David Rosenberg says,

Yes, we may well be seeing a deviation in the trend line in inflation, but not a reversal, despite all the cries to the contrary. While inflation continues to make the front-page news and commentary, mostly from people who don’t truly comprehend what inflation actually is or how it is determined beyond … their Bloomberg terminals, the big risk that lies ahead is a 2021 economic boom.

So I think you’re saying stay the course, my portfolios are doing ok

Nothing is perfect and portfolios will adjust to the ups and downs of the markets. Sure, it can feel like one step forward, two steps back, but your portfolios are based on your financial plans and objectives.

You own best-in-class stocks and you’re invested for your long term.

If you think we need to review your plan, please call me. If your friends or family need to review or even start a plan, then please have them reach out or feel free to introduce me.

Thank you

Christian Steinbock