“Emancipate yourselves from mental slavery, none but ourselves can free our minds” Bob Marley, Redemption Song

What if you knew that you had limited time on this earth and you had the chance to leave a final message that summed up the legacy you want to leave behind. What would you say…? Who would you be writing for..? How will you be remembered…?

Bob Marley essentially had that opportunity with “Redemption Song,” the last song on his final album with The Wailers, Uprising, in 1980. Marley died on May 11, 1981 at the young age 36, from complications from cancer. While there’s no indication that Marley knew for sure that the song would be his last recorded document, the contemplative mood of Uprising and the fact that he had been battling the cancer for years seems to suggest that he knew the end was near.

In my view, Marley composed one of the best songs of all time, a song that would become emblematic and immortal, not only for its form, different from his previous pieces but also and especially for its intense meaning that resonates with every listener, through the generations. Interesting fact, Marley had actually derived the eternal verses of the chorus “Emancipate yourselves from mental slavery, none but ourselves can free our minds”, from a powerful speech entitled The Work that Has been Done, held by Marcus Garvey in the African Orthodox Church of St. Phillip in Sydney, Nova Scotia, in October 1937. In today’s demanding and ever-changing world, Bob Marley’s Redemption Song is an acoustic anthem for us all. A reminder to us that we should approach each day through a mindfulness lens that will ensure that we are taking advantage of the opportunity we have to not only enhance our Wealth, but also dictate the imprint we have on history and direct the legacy we leave behind.

Mindfulness or being mindful and intentional is not obscure or exotic. It’s familiar to us because it’s what we already do, how we already are. To be mindful suggests that the mind is fully attending to what’s happening, to what you’re doing, to the space you’re moving through....the basic human ability to be fully present and aware of where we are and what we’re doing, and not overly reactive or overwhelmed by what’s going on around us. Mindfulness is a quality that we all already possesses. We are in control of our thoughts, our emotions, our moments…and the legacy that we choose to leave behind.

“We can be redeemed only to the extent to which we see ourselves.” Martin Buber

And now, to the Markets….

It has been a challenging few weeks for global equity markets, with most having been relatively weak of late. There’s no one factor to blame, though inflationary pressures and the implications for central bank interest rate policy remain core issues. There are other challenges too, but in the interest of time, we’ll save those for another day. Below, we share some thoughts on the first quarter earnings results which are now about halfway complete.

Prior to the beginning of the reporting season, the number of companies that had issued negative preannouncements – announcing results ahead of when they were expected to report – exceeded the number of companies reporting positive preannouncements by a wide margin. As a result, investors were quite cautious heading into the season, believing that companies were witnessing deteriorating demand, or rising costs, or worse yet, a combination of both.

Fortunately, the results reported thus far have been somewhat reassuring. Earnings growth for the broader developed markets is now expected to be over 10%, nearly double the original estimate at the start of the reporting season. Moreover, some of the upside to forecasts has been driven by margins, suggesting cost pressures have not been as severe as expected, at least not yet. Nevertheless, there are clearly some industries where labour, commodities, and other inputs are either in short supply or witnessing meaningful pricing pressures. This has led some companies to reduce their guidance for future earnings. But, on average, the results suggest that companies are still seeing decent levels of demand, particularly from consumers, and are finding ways to navigate through the cost pressures with a degree of resiliency.

The Technology sector is worthy of some discussion. Investors have been anxious about this cohort given its significance in the global market – it is the biggest sector and home to some of the largest stocks in the world. The group broadly benefitted from the global pandemic, with consumers and businesses spending more on hardware, software, and services for some time. As a result, the earnings and stock prices of many companies across the industry appreciated remarkably in recent years.

This year has been a starkly different experience. The sector has been among one of the weaker performers, partly in anticipation of a moderation in earnings growth. That has indeed been happening with the pace of growth nearing the average of the broader markets. On its own, it is a reasonable figure. But, it is a far cry from the 40% earnings growth witnessed at this point last year.

There is another important factor pressuring the technology space: anticipation of higher interest rates. Stock prices tend to be driven by a discount rate that is applied to a stream of future earnings, cash flows, and dividends. The rate that is used is heavily influenced by the level of interest rates. All things equal, a higher rate results in lower prices, and vice versa. Higher growth stocks, like some of those in the technology sector, are particularly sensitive because of the anticipated trajectory of their longer-term cash flows. As a result, it’s not surprising to see technology stocks under pressure in a year when bond yields have been rising and central banks are expected to raise rates rather forcefully.

Overall, investors should be comforted to some extent by the earnings season that has unfolded thus far. It suggests the operating environment remains reasonably healthy from a demand perspective. Nevertheless, the results have not been enough to offset the myriad of macroeconomic and geopolitical issues that continue to confront investors and we continue to be active in our positioning for the months ahead.

“We just philosophize, complain of boredom, or drink vodka. It's so clear, you see, that if we're to begin living in the present, we must first of all redeem our past and then be done with it forever. And the only way we can redeem our past is by suffering and by giving ourselves over to exceptional labor, to steadfast and endless labor.” Anton Chekhov, The Cherry Orchard

As we head into the week, let’s remember that in order for us define our purpose, understand our goals and to continue to progress daily, it requires us to become more self-aware and mindful. It also involves reflection, which can be difficult and challenging at times. However, reflection is just as important of understanding how we want to be remembered. If we can have a clear understanding of how our history was molded us, we can have a better understanding of the path we clear for ourselves moving forward. Free your mind and you will have a purposeful focus that will ensure you have the wisdom, the ability, and the strength to achieve the Wealth and the Legacy you are striving for, Triumphantly.

“Now the wren has gone to roost and the sky is turnin' gold

And like the sky my soul is also turnin'

Turnin' from the past, at last and all I've left behind”

Ray Lamontagne, God Willin' & the Creek Don't Rise

Be well & enjoy the moments

Derek