“Keep your thoughts positive because your thoughts become your words. Keep your words positive because your words become your behavior. Keep your behavior positive because your behavior becomes your habits. Keep your habits positive because your habits become your values. Keep your values positive because your values become your destiny.” Mahatma Gandhi

Good Morning,

We all understand what values are, those core traits we all possess that are the most important elements of the way we live and the way we work. When was the last time you sat back and reflected on what your values are? When was the last time you wrote them down in an attempt to understand if they are aligned with the vision you have of yourself?

In our work with clients in creating Wealth with Purpose, our approach entails a lot of work ensuring that clients make the time to understand and revisit their values. We believe that your values are a foundation upon which to build and that these values are at your core purpose in your own unique Wealth journey.

That said, understanding our values, our drivers, and our motivations is difficult in the best of times, let alone when we are surrounded by forces that are out of our control. The last couple of years have stretched almost everyone….and given that we are still engulfed with uncertainty can make it more difficult to focus on our values as we make decisions on our journey forward. So we need to find a path to recovery that honors our current state but doesn’t leave us here…..

So…what do you do in this environment of sustained uncertainty, as you look to understand values and ensure your habits are in line with those most important elements. We need to focus on our habits….

According to Elizabeth Grace Saunders, a time management coach and the founder of Real Life E Time Coaching & Speaking. She is author of How to Invest Your Time Like Money and Divine Time Management. The most effective long term game plan is to steps back and for us to take a “whole-person approach” to leaning into our core values that make us the inspiring and motivated individuals we are today. What’s a “whole-person approach?? Elizabeth encourages us to remembering the basics of taking care of yourself through sleep, nutrition, and exercise that lay the foundation for you to, then advance in other areas of progress and purpose. If you find yourself longing for a change, here is the pathway she shares to rediscover your values and sustainably build upon your purpose.

Start with Sleep

If you’re super tired, then the key to greater productivity is not to push harder, but push less. Once you start getting enough sleep habitually, your body will support you in your values focus and in accomplishing your daily goals.

Think About Nutrition

Once you give yourself sufficient time to rest, then you’ll start to have the capacity to work on other areas. The next most effective habits for rebuilding energy involve simple nutrition strategies.

Get Moving

Once you have the building blocks of sleep and nutrition in place, then you need to start thinking about integrating in physical activity. Counterintuitively, exercise ultimately gives you more energy throughout the day instead of depleting it. It also has the added benefits of improving mood, sleep quality, and focus.

Pick a New Habit

Once you’ve integrated in the healthy habits that will greatly provide the foundation for your values focus, then you can pick other new habits to fold into your life. Attending to the basics of sleep, nutrition, and exercise will have improved your energy and focus during the day so that you have the capacity to take on more in your quest to become the individual you want to be, understanding and unwavering in your values and drive by purpose.

Values not value are at the core of life purpose. Focus on values and you shall find value. Shaun Tomson, World Champion Surfer

And now, to the Markets

Volatility has been more subdued in recent weeks, as has the commodity complex, while bond yields and equity markets have continued to grind higher. The war in Ukraine has now moved into its second month. Some reports have suggested that Russia has begun to narrow its focus to the Eastern regions of Ukraine. It is too early to confirm whether that is indeed the case. Nevertheless, the prospects of a conflict that may be turning a bit more targeted, may have contributed to the market action of late, which has been less turbulent than what was witnessed a month ago. Below, we discuss the U.S. yield curve, which has received an excessive amount of attention by most major financial news outlets.

What exactly is the “yield curve”? It can be thought of as a series of expected returns for government bonds with various different maturities. There are yields for short-term government bonds that mature in a few months for example. There are also yields for longer-term bonds that mature in ten years, or even longer. The yield curve is simply a line that links all of these various yields together.

An upward sloping curve suggests investors are willing to accept a lower return for bonds that are shorter-term, while demanding a higher return for longer-term bonds to compensate for the extended holding period. In reality, the shape of the curve can, and often does change, because bond yields are determined by investor expectations. More specifically, it’s possible for shorterterm yields to be driven higher or lower, while longer-term yields may move to a lesser extent or even in the opposite direction.

The dynamic explained above has taken place to some extent in recent months. Investors have been preparing for central banks to raise interest rates quite aggressively. As a result, short-term bond yields have moved sharply higher. Meanwhile, longer-term bond yields have risen less dramatically of late, as they are being influenced by concerns around whether central banks could raise interest rates too far, resulting in more restrictive financial conditions that could eventually present headwinds to economic growth. This divergence over the past few months has resulted in a flattening of the yield curve, and in some cases, an outright inversion where longer-term bond yields have fallen below shorter-term yields.

Why all the fuss over the yield curve? An inversion of the U.S. curve has proven to be a useful signal that a U.S. recession may lie ahead. But, as with most issues in investing, there is significant nuance that needs to be considered. First, there are different yield curves depending on the maturities being analyzed. Some of the other yield curves are still upward sloping, suggesting recession risks remain relatively benign. Furthermore, there can be a significant lag, often well more than a year, between a yield curve inversion and a recession. Moreover, the U.S. Federal Reserve is expected to begin selling bonds in the not too distant future as part of its plan to unwind one of its programs put in place in 2020 to address the pandemic-induced recession. Those bond sales could add upward pressure to longer-term bond yields, and potentially unwind some of the flattening of the curve that has taken place.

Here at RBC Global Asset Management, our team regularly reviews and publishes a U.S. recession scorecard which consists of seven different indicators, including the yield curve. Todate, none of these have flashed warning signs this cycle, giving us confidence that it remains premature to be too concerned about the risks of a recession. Nevertheless, these indicators can, and will change, over time. For that reason, we continue to be attentive.

“Well-being is realized by small steps but it is truly no small thing.” Zeno

As we head into the week, we can take some time to revisit your values and continue to cultivate good habits that will ensure we are spending our time aligned with who it is we imagine our future self to be. If you take the time to rediscover your values, then the only expectations you need to live up to are your own.

“Values are like fingerprints. Nobody’s are the same but you leave them all over everything you do.” Elvis Presley

Be well and enjoy the moments

Derek