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RRSP Reminder
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Global Economy on a Solid Footing
The global economy continues to prove more resilient than expected despite persistent concerns about higher borrowing costs and geopolitical upheaval. This is partly due to the U.S. economy, which continues to outperform major developed economies on the back of healthy household spending and labour market conditions. Through much of 2023, there was evidence of slowing growth in Canada and globally, particularly in the manufacturing sector, and to a lesser extent services. In contrast, the U.S. appeared to be moderating rather than slowing to the degree seen elsewhere.
A further decline in inflation while the U.S. economy remains resilient could encourage the Federal Reserve to cut rates. Such a soft landing is possible although not yet certain - there are still reliable leading indicators suggesting that for now the door to recession remains open. Given that markets currently ascribe a low probability to a recession, any fading of economic growth or a resurgence of inflation could usher in a period of cutbacks in markets.
Our Strategy
Long-Term Perspective
Geopolitics is always and will always be at the forefront of the discussion when considering markets and how they’re affected. That said, our focus remains on finding high-quality investments at affordable prices. We ignore all the noise of the short-term buzz and concentrate our energy on solid companies that generate stable, long-term growth and value.
You may be aware that some sectors have attracted a lot of attention recently, such as the technology sector. Although investments like these may seem very appealing, we are committed to remaining disciplined and refuse to commit any capital to overvalued and over demanded stocks. The price we choose the pay for a holding is ultimately the biggest determining factor of our investment success.
Finally, we always ensure to keep enough liquidity in our portfolio to take advantage of opportunities that come our way.
Keep Moving Forward
- Maintaining discipline is crucial: Market corrections tend to set off emotional responses and test the mettle of investors. When volatility increases, it is natural to believe that it might continue and/or that something should be done. But for those that have a well-devised investment plan, we believe resisting the impulse to deviate from the long-term plan is important during inevitable “cold stretches” in equity markets.
- Time in the market matters more: Precisely timing the market peaks and troughs demands three conditions: avoid selling as the market continues to move higher; sell at the top; and time the re-entry at the bottom. The possibility of consistently fulfilling all three conditions across multiple market cycles is extremely low, especially when considering that historically the market’s best days have often followed the sharpest drops.
The charts below illustrate how much mistiming the market, even by just 10 days, can negatively impact an investor’s outcome. The more suitable approach is to stay disciplined and invested, which can help keep investors on the trajectory towards achieving their long-term financial objectives.
One investment rule at Berkshire has not and will not change: Never risk permanent loss of capital. "Thanks to the American tailwind and the power of compound interest, the arena in which we operate has been – and will be – rewarding if you make a couple of good decisions during a lifetime and avoid serious mistakes." - American businessman, investor, co-founder, chairman and CEO of Berkshire Hathaway
As always, we'll be happy to answer any questions you may have.
Yours sincerely,
Benoit Legros, B.A.A., CIM, FCSI
Portfolio Manager and Senior Wealth Advisor