"I have just three things to teach: simplicity, patience, compassion. These three are your greatest treasures.” Lao Tzu

Good morning,

We all know the old adage: patience is a virtue….there’s truth to this. Patience can help us achieve our goals, maintain a more positive outlook on life, and make us less reactive, which in turn will make us less prone to hasty decisions, stress and regret. As Leo Tolstoy once suggested, “the two most powerful warriors are patience and time”, and if we understand that we have time, if we are able to employ patience we can conquer anything.

“Patience and perseverance have a magical effect before which difficulties disappear and obstacles vanish” John Quincy Adams

When it comes relates to investing, patience is the most undervalued still. Benjamin Graham, known as the “father of value investing,” knew the importance of patience in investing . Patience and investing are actually natural partners. Investing is a long-term prospect, the benefits of which typically come after many years. Patience, too, is a behavior where the benefits are mostly long-term. To be patient is to endure some short-term hardship for a future reward.

“In the end, how your investments behave is much less important than how you behave.” Benjamin Graham

Being a patient investor might not be easy but there are a few strategies that can cultivate patience and clarity.

Have a plan and think long term - Set long-term financial goals and keep them front of mind during volatile times. A written financial plan is a great idea and our long-term thinking assist us in mentally separating your investing journey from your long-term financial destination. Keeping a long-term perspective will give you the psychological fortitude you need to grow your portfolio over the long term.

Understand that market volatility is normal - Market volatility is a normal part of life. It might still be unpleasant in the moment, but recognizing that you’ll encounter volatile markets from time to time can help you mentally prepare for corrections or other downturns.

Remember, time is on your side - Take solace in the long history of capital markets. Corrections are temporary and usually brief, and even bear markets eventually end. Historically, markets go up far more often and by a much greater margin than they go down. Owning stocks for the long term is one of the best ways to profit from economic progress, innovation and compound growth.

“Waiting helps you as an investor and a lot of people just can’t stand to wait. If you didn’t get the deferred-gratification gene, you’ve got to work very hard to overcome that.” Charlie Munger

And now, to the markets

Global equity markets have been able to shrug off some of the uncertainties posed by the discovery of the new omicron variant a few weeks ago and are once again flirting with their highs for the year. The renewed strength comes amidst reports that the variant may be more transmissible but cause less severe illness. Moreover, preliminary evidence suggests vaccines may still offer people some degree of protection. This has reassured investors that the risk posed to the global economy may be small. Below, we offer some thoughts on the year ahead, which we believe has the potential to deliver another good, albeit less spectacular, year of gains for investors.

Our underlying view for 2022 is that it will be a year marked by some moderation in trends. Rising levels of vaccinations and natural immunity, combined with less morbidity from variants that are likely to remain in circulation, should gradually lead to a more normal environment. We expect some reversion in some of the most influential factors that typically drive equity returns: inflation, growth, and central bank support. Inflation has been on the rise all year. In some countries, it sits at levels not seen in decades. But, it is calculated as a year over year price change figure, and the 2021 readings have compared prices to the year ago period, when the effects of the pandemic were most severe. As we move through 2022, price levels will be compared to levels from this past year, and thus inflation readings over time should recede to some extent.

Furthermore, some of the supply chain pressures that have plagued many industries may ease given the efforts that are underway. Meanwhile, the exceptional demand for goods should eventually shift back towards services as conditions normalize and the hospitality industry experiences a long awaited revival. Overall, these factors should lead to some moderation of inflation in pockets of the economy. Nevertheless, it may still remain higher than we’ve been accustomed to, underpinned in particular by wage pressures as a result of labor shortages and the elevated level of job openings.

Central banks have started to unwind some of the exceptional amounts of stimulus provided to economies over the past two years. Over the next week, the Bank of England and U.S. Federal Reserve are expected to provide policy decisions. Regardless of the outcome of these meetings, the future direction is clear: less stimulus and the possibility of tighter monetary policy in the year ahead. While this may create some bouts of volatility as investors digest the implications, we believe it will take time and several interest rate increases before credit conditions become more restrictive and present a headwind to economic growth. That is more likely a risk for 2023 or 2024 rather than next year.

Overall, we expect the backdrop in 2022 to be characterized by healthy economic and earnings growth, modestly lower inflation, and an interest rate environment that will remain favorable for consumers and businesses. That should be supportive for equity markets. As always, there will be risks, both known and unknown, that investors will have to grapple with. Moreover, stock market valuations are on the more expensive side of history. That does not necessarily imply there’s an imminent risk to equities. But, it does suggest investors should manage their expectations, prepare for more moderate levels of returns over the foreseeable future, and ensure they have well diversified portfolios that are not overly exposed to any one particular asset class or sector.

“When it comes to patience, we don’t have to change old habits; we can build better ones” Sue Bender

As the year winds down to a close, it’s a perfect time to reflect on the year and how each of us has positioned ourselves; personally, professionally and financially…for the year in front of us. You can look to the new year as a new day, a time to visualize who it is we desire to become and focus on the routines that make us better. Approaching life with perspective and patience can ensure that we are ready to conquer the exciting road ahead.

Be well & enjoy the moments

Derek