Trucker protests. The Emergencies Act. Omicron. Inflation and interest rates. Housing prices. Supply chain bottlenecks. Russia, Ukraine and NATO.

And that’s just a shortlist. Suffice to say: there is a lot going on.

But here’s the thing: it’s all just noise. To the ears of some investors, it’s noise louder than a trucker horn in Ottawa. But the companies we own regard it as barely a distraction – as irrelevant in the long run. Because no matter what the world does, those companies will continue to thrive and prosper.

The graph below, which looks at the markets since 1900, tells a crystal-clear story. It doesn’t matter what gets thrown at the world, be it World Wars, The Great Depression, Black Monday, the global financial crisis of 2008, the coronavirus or countless other crises. The market may decline for a short time, but it always returns to its upward climb.

Consider this: an investment in 1900 of just one dollar in the US stock market would, by 2022, have grown to $106,000, assuming all dividends were reinvested. That is a cumulative return of more than 10 million percent, or almost 10% per year.

Let’s look at a more relatable timeframe. What happens if we go back to 1980 (when oil prices and inflation were setting all-time highs, as it happens), when many of our clients were in their 20s, and invest that same dollar? Here in 2022, we would have $120 – a return of 12,000% – or almost 9% per year.

The bottom line is that we need to stay invested. We need to stay in the market as it inevitably goes down from time to time, because, as one of our most important mantras goes, it’s not about timing the market (which is impossible), it’s about time in the market.

There is an exception to this rule: if you need your money back in the next five years, you should be out of the equity markets and invested in bonds or similar fixed-income instruments, so you are protected against a market decline that does not recover within that timeframe.

THIS MIGHT SURPRISE YOU

There has been a lot of talk about the impact of inflation and interest rates on market performance – but these two factors are not as important to that performance as you might think. In 2014, I had the privilege of taking a course in value investing from George Athanassakos, a professor of finance who in fact holds a chair in value investing at the Ivey Business School. Here is what he points out in a recent Globe and Mail article: on 11 of the last 12 times since the 1950s that the US Federal Reserve raised interest rates, the markets went not down but up that year – an average of 9%.

BACK TO THE FUTURE

Here in 2022, at Marche Wealth Management we are ignoring the noise, and in addition are sticking to our strategy. As a result, we are outperforming the market. At time of writing, the TSX and all of the US indices (including the S&P 500 and the Dow Jones) are down – by double digits in some cases. But all of our portfolios are in positive territory, on track to continue to deliver above average returns to our clients.

Contributing to our outperformance is that, aligned with our strategy as always, we repositioned our portfolios earlier this year to capitalize on volatility. We are always watching very carefully for companies we think are underpriced, and on that basis we added a few new names to our portfolios.

For example, we added Restaurant Brands International, which owns Tim Hortons, Popeyes and Burger King. One aspect of our strategy is to own companies that are resilient to rising inflation, meaning they are capable of passing along price increases to their customers. We believe that Restaurant Brands International is well-positioned to do just that, and also that they will benefit from the loosening of Covid restrictions, as more people spend more time at their workplaces and so will increasingly patronize these businesses. Which, in turn, will allow Restaurant Brands International to continue increasing the dividends they pay us over time.

STRENGTHENING OUR TEAM

The things I take most seriously and also take the most pride in are being responsible for managing your portfolio, and looking after what is most important to you and your family. So I can spend even more time protecting and growing your capital for generations to come, I am in the process of adding three new people to our team:

Dan Dharmarajah, MBA, CIM, is an experienced manager of high net worth and ultra high net worth portfolios. He will be an Associate Wealth Advisor on our team – primarily assisting me with the research, administrative and executional aspects of portfolio management.

Tracy McClure, CPA CA, CFP, is an accountant and Certified Financial Planner who will be dedicating her time to delivering Canada’s best financial planning to our clients. Tracy worked closely with our team when we were at BMO, and I am happy she will be working with us again.

Myra Villaflor will be working alongside Joy Loewen, performing a range of administrative duties to keep our office running smoothly.

Please watch for communications in the coming weeks, when we will be formally introducing these important people to you.

LAST CALL

Most of our clients have been in touch to make RRSP contributions. The deadline is March 1st. If you would like to make a contribution or talk about doing so, please let us know right away.

To make tax season as simple as possible for you, click for two RBC files: 2022 Handy Financial Planning Facts, and the 2021 Client Tax Guide. Have a look if you like, and please do not hesitate to contact me with any questions or discussion points you may have.

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We don’t speak jargon. We’re all about uncomplicating your life, so we speak plain English. If there is someone you care about – someone who would appreciate this simple and straightforward approach – please feel free to share this message with them or put us in touch.

Want to discuss any aspect of this month’s blog, or any other issue on your mind? Have a story idea? I am always happy to receive your call or email.