The year-end brings with it a heavy schedule of activity in our office. Account reviews, gain/loss revisions and preparing everyone (as best we can) for the tax season that will soon be upon us. It is also a time where we give and receive thanks and remember just how grateful we are for each other, our families, friends and all of you. We send this “KYI” with heartfelt best wishes to you and your families and much gratitude for the trust that you place in us.

 

2021 was a heck of a year. Since navigating a path that saw us close up our offices and move to the isolation of basements and spare bedrooms, much has transpired. The last two years have provided an opportunity to improve our communication with you and each other, embrace technology in ways we had never imagined and become more flexible human beings. That road map has now come full circle as I look out my office door to a very welcomed hustle and bustle. Desks are reoccupied, a steady hum of chatter and the coffee machine running at full capacity. It all brings a smile to my face.

 

Every year, the firm pulls from its many resources to create an outlook for the year ahead. These are a couple of themes that I found meaningful and worth sharing:

 

Firstly, the overriding theme for portfolio construction remains the same as it has been for the last 15 years. Be invested and structure an investment portfolio diversified across asset classes where the equity component is further spread across industry sectors. Aiming for the most attractive, resilient businesses in each sector is the appropriate stance in a world of unpredictable possibilities. We will continue to focus on large businesses that have the deepest financial strength and are able to invest heavily in new technologies. Companies that can grow sales, earnings and dividends at a rate as fast (or even faster) than the economy will provide us with a reasonable expectation for returns. We have seen a prolonged period of consolidation and concentration, and we do think that will continue into 2022 and 2023 as rates still remain accommodative to corporate debt.

 

Secondly, on the continued march toward greener portfolios and investments that move the needle in energy transition, the International markets will play a predominant role. European countries host the largest and most mature corporations and are not solely reliant on government subsidies. While individual equities of companies that are involved in renewable energy can be good sources of investment ideas, we think that the complications of currency and research outweigh the small additional cost of a specialized manager in this area. This is a multi-decade transition that requires day in and day out focus to keep abreast of near term opportunities that will both add value to your portfolio and the environment.

 

Lastly, I will add a comment on the outlook for interest rates. A reminder that we are coming off near zero lows and any increase in rates is still going to create an accommodative environment for business. In a recent issue, I discussed the effect of increasing rates on your portfolio and I believe that the balance we have worked towards in duration and return will serve us through the next calendar year.

 

Onward to 2022!

 

Warm regards,

 

Joanne, Mike, Isabel & Jenny

Livingston Wealth Management Group