Good morning,
I trust the weekend was a wonderful one.
At the Henderson house this weekend, we spent our time debating on whether it’s too early to play Christmas music in the house and/or put up the tree – so we’ve landed on just having blown up frosty in the front yard, and the music limited to my garage….for now. Winter is coming! Exciting!
Joe Wheeler once said, “There is something incredibly nostalgic and significant about the annual cascade of autumn leaves” and I couldn’t agree more…there certainly is magic in change and, if we are able to embrace it, we have the power to ensure change provides an abundance of opportunity.
On the investment front, the month of November is proving to be one of the stronger periods of the year with global equity and bond markets notably higher. Those gains have made up for some of the weakness witnessed during the first part of the fall. There may be a few factors that have driven the strength of late, but none are more important than inflation trends, which continue to show signs of abating, welcome changes as we approach a new year of opportunity.
The Great Tsunami
There is a change in our midst, something worth noting, given all of the change that we are seeing in the macro economy and the investment landscape, at the moment – a point in time that I refer to as “the great tsunami.”
The term tsunami originates from Japanese:. 'harbour wave' is a series of waves in a water body caused by the displacement of a large volume of water, generally in an ocean or a large lake. The Great Tsunami I’m referring to is often also referred to as “The Great Wealth Transfer”, an intergenerational wealth handover that is underway globally.
A statistic from the US that lends itself to the big wave - Baby boomers and the silent generation will bequest a total of $84.4 trillion in assets through to 2045, with $72.6 trillion going directly to heirs.
Here in Canada, over $2 trillion in business assets could change hands within the next decade as over three-quarters (76%) of business owners are planning to exit their business, according to a new report by the Canadian Federation of Independent Business (CFIB).
Retirement is the top reason business owners cited for leaving their business (75%), while 22% are burned out and 21% want to step back from their responsibilities as owners. However, only one in 10 business owners (9%) have a formal succession or continuity plan in place.
“It’s essential for business owners to have a well-planned exit strategy. With over $2 trillion set to be in play in the next 10 years and only a fraction of business owners having a formal succession plan, the risks of improper planning can be big,” said Corinne Pohlmann, Senior Vice-President of National Affairs at CFIB. “Planning for business succession is a key factor in in ensuring that Canada continues to have a healthy business community.”
Today, we are preparing for your defining moment. All these market shifts and trends highlight the need for everyone to look closely at their planning, for their next act in life, for their plan for the new seasons ahead. It’s also evermore important for Company owners and founders to prepare for critical decisions as they face what is no doubt a defining moment for their businesses and their legacies. Given the complex family dynamics at play, a successful transition plan will require strong governance practices for making business decisions at both the ownership and operational level. This will allow owners and their families to better align around the future of the business and undertake the strategic thinking required in today’s challenging economic environment.
Given our specialized focused at Henderson Family Wealth, our expertise in Investment Management complemented by a focus on Family Enterprise advisory and Exit Planning, our deep work with clients is focused on working on discovering purpose, uncovering your true intention – a common threads that weave through the planning, particularly as it relates to the focus on wealth preservation, growth, and transcendence across generation. We’ll touch on this more below…..but first
….to the markets
The most recent U.S. inflation reading, for the month of October, was released over the past week. These days, all sorts of inflation metrics tend to get measured. But generally, there is a “headline” inflation figure that includes all categories (goods and services), and a “core” figure that removes more volatile areas such as energy and food. Both came in below expectations. More importantly, both suggested the easing in inflationary pressures continues to progress. A year ago, the year-over-year figures stood at nearly 8.0% (for headline) and nearly 6.5% (for core). Today, those figures stand at close to 4.0% and 3.2%, respectively.
On the Canadian front, the inflation data has been telling a similar story. The figures for October will be released over the next few days. However, the figures for September, released nearly a month ago, showed an easing in inflation trends which provided some relief to investors who grew a bit antsy after a brief reacceleration in inflation during the summer. The Canadian headline and core figures as of September were both under 4.0%, meaningfully lower than the 6.5%-7.0% range witnessed a year ago.
Beneath the surface, there are some pressures that remain rather intense in Canada. For example, shelter, which is the largest component of the Canadian CPI (Consumer Price Index) at just over a quarter, continues to see notable pricing pressures. That is primarily because mortgage interest costs are up nearly 30% year over year and have been the biggest contributor to Canadian CPI of late. It’s hard to imagine that moderating any time soon with the number of Canadian households expected to have to refinance their homes over the months to come. This suggests that one of the meaningful drivers of year over year inflation in Canada may remain elevated for some time to come.
The key takeaways with respect to inflation trends differ depending on one’s perspective. As a consumer for example, falling inflation does not necessarily mean falling prices. Instead, it means that prices are not increasing by as much as they were previously. That’s an important distinction because consumers may still be faced with a relatively high cost of living compared to years ago where prices for nearly everything were significantly lower. From an investor’s perspective, falling inflation is instead a meaningful tailwind because it raises the odds that central banks such as the U.S. Federal Reserve and Bank of Canada may not have to tighten financial conditions further by raising interest rates to fight off inflationary pressures. That is largely what has transpired this year as a fall in the rate of inflation has changed investors’ expectations around interest rate hikes and resulted in less volatility this year compared to the year ago period when inflation was accelerating.
Regardless of persona, it is important to distinguish between the end of interest rate hikes and the beginning of interest rate cuts. For the latter to occur, a bigger fall in the pace of inflation or emergence of broader economic weakness would be required. Those scenarios are possible outcomes as we start to think of what conditions may look like at this point next year.
Discover • Align • Design • Ascend
“You must live in the present, launch yourself on every wave, find your eternity in each moment.” ~ Henry David Thoreau
Alan Watts famously noted that “You are a function of what the whole universe is doing in the same way that a wave is a function of what the whole ocean is doing.”
I’m of the mind that if we take time to understand the nature of the ocean, we can appreciate its rhythm and align our action with our intention to harness the power of the sea.
An intention is a path you aim to align to. It guides our thoughts, actions, and attitudes. If you consider that your life purpose is who you are at your core, then an intention can help you discover who you’re meant to be, and how you’re meant to show up in the world.
Intentions are heart-centered, emotionally charged beliefs that guide our actions. Setting intentions helps to bring our beliefs, emotions, and actions into alignment and before we can plan for the future in front of us. We must first explore our own unique intention. In the spirit of uncovering intention in the face of the great tsunami, I thought it worth highlighting a few of the steps we can explore to illuminate your driving force towards understanding, towards progress and towards growth.
- Start with Gratitude
- Identify Your Core Values
- Decide What You Stand For
- Discover Your Vision
- Create a Personal Development Plan
Your intention is the compass to enable you to ride into the tsunami of opportunity.
As we head into the week, we can start with gratitude, an essential part of the intention-setting process, because it allows you to shift your focus to the good things you already have in your life. Gratitude helps you to appreciate your life as it is, without trying to change it. Begin your intention-setting exercise, begin by writing down at least 12 things you’re grateful for. Be specific and you will begin to uncover your true intention, the innate purpose that drives you….an understanding that is already within you that once understood, decisions on forging your path will become much clearer.
“A Zen master used to say, It is clear and so it is hard to see. A man once searched for a fire with a lighted lantern. Had he known what fire was, he could have cooked his rice much sooner.” - Rajneesh
Be well & enjoy the moments.
Derek Henderson