Happy New Year! I hope you managed to find some enjoyment in the holiday, despite pandemic-related restrictions. My family and I had some fantastic together-time: enjoying great meals, going for hikes, walking the beach, playing board games and watching more classic Christmas movies than ever before.
I also took the opportunity to re-read every edition of Marche Monthly that I sent you last year. Like 2020 itself, it was quite a trip. Here is my review, and what stands out most to me.
I started off the year by saying, in the January edition:
“As the decade begins, we remain in the longest bull market in history. It began in 2009, after the financial crisis.
“But of course, it can’t last forever.”
I certainly didn’t see coronavirus coming, and I won’t claim to have known that the market was going to drop dramatically the very next month.
But the bull market couldn’t last forever, and it didn’t. By the time of the February Marche Monthly on the 7th of that month, I had this to say:
“We are closely monitoring the coronavirus news coming out of China…No matter what happens, we are in a position to capitalize on opportunities that any instability may present. If we feel that the market misprices the risk presented by the coronavirus – if stock prices were to fall lower than we think they should, for example – we are ready to buy.”
The market’s first crash of the year occurred on February 20.
By March 6, the date of our March edition, COVID-19 was truly starting to take hold. Our blog opened with this line:
“Last week, the Dow Jones Industrial Average had its worst week since the 2008 financial crisis, dropping 15% from its peak.”
But then this:
“For our clients, there is little to worry about. As we have been saying, the market was long overdue for a selloff anyway.
“I think this is a normal, healthy correction. We have had four of these corrections in the present bull market. On each and every occasion, the market rebounded, generating above average returns: an average of 11% within six months.”
I was especially pleased by the fact that our clients so clearly understood and were comfortable with our long-time strategy:
“I am happy to say that last week, our phone barely rang. Most of our clients are not concerned about market volatility, as we have been communicating for quite some time that our portfolios are deliberately conservative, specifically positioned to withstand a correction.”
I also raised the dangers of some investors being trained to not think:
“They are being trained to be passive – to essentially buy the market by buying index funds and exchange-traded funds (ETFs), instead of doing their homework to deeply understand which companies they should own and then buy accordingly. When you own a portfolio that is essentially the market, last week you were down essentially as the market was: a lot.
“In contrast, since our clients do not own the market, they have much safer portfolios and can capitalize on volatility, because we have the flexibility to shop around for stocks priced lower than we think they should be.”
March was such a volatile month for the markets that a special, second edition of Marche Monthly was warranted. Its headline: “It is not the time to be afraid.”
“On Monday March 16th, the markets had their worst day since 1987, and yet our portfolios are still holding up very well. They are essentially at the same spot as one year ago. Compare that with the overall market, which is down 20% on average just this month.
“It is not the time to be afraid. Nor is it the time to simply weather the storm. Instead, it is the time to selectively shop.
“How? Over the past several days, we have been taking small amounts of cash and investing, very judiciously, to increase your ownership of high-quality businesses that are suddenly at great prices. We will continue to take this opportunistic yet careful approach.”
By April, I was able to reflect on the fact that our portfolios, and our relationships, were strong indeed:
“The current crisis has also given me the opportunity to have many in-depth conversations with our client families. One of my key takeaways from these conversations is that, because of the financial plan we have created by partnering with our client families and other experts, not one client needs to sell any stock, for at least the next five years, to fund their lifestyle or other expenses.”
By May, a new area of focus was becoming apparent in our clients’ minds:
“The pandemic has also inspired many clients to be more focused on their estate planning needs, including insurance and wills.”
You were taking care of yourself and your beneficiaries, and were also expressing concern more widely:
“[Many] of you have expressed concern for the financial circumstances of your friends, family members and colleagues, and in some cases the institutions and foundations they are involved with. I have since spoken with a number of people you have referred to me, and we have had many constructive conversations and positive outcomes.”
As I did then, I will say now: thank you.
By its mid-point, 2020 had proven itself to be truly bizarre. Or had it? The opening lines of the June Marche Monthly:
“Senseless murders. A pandemic flu that kills 100,000 Americans. Space missions. Rioting in the streets.
“I am writing, of course, about 1968.
“Five months into 2020, there have been comparisons made to that year, which Smithsonian called ‘the year that shattered America.’”
And later:
“Looking to the market, I see further parallels between 1968 and 2020. [There] was a disconnect between political events and market performance: the former were much worse than the latter.
“In 2020, this disconnect is also apparent. The market dropped 36% between January and March, has since then recovered considerably, and even though it is still down by double digits, I expect it to finish the year on a positive note.”
The first half of 2020 was the most volatile in history. By year end, however, all major indices delivered positive returns: the Dow Jones was up 5% overall, the TSX 2.2% and the S&P 13% (all in Canadian dollars).
July brought with it some terrific relief: beautiful well-deserved weather, and some equally well-deserved Canadian pride:
“Here in the week of Canada Day, it just so happens that our client portfolios have more Canadian companies in them than they’ve had in over a decade.
“Why?
“[For one thing], I like the approach that Canada is taking to the pandemic. Our leaders have been driven by science and medical evidence as opposed to politics. The result is a more stable economic environment north of the border, as the United States deals with a 90% increase in new COVID-19 cases over the past two weeks.”
I should not give anyone the impression that I see the Canadian response to the pandemic as perfect. Far from it. But I still believe that overall, our experts are taking an evidence-based approach, and that that’s the way to go.
August, in the so-called “lazy” days of summer, had us asking a tough question:
“What’s going to happen when the money runs out?”
I was making the point that pandemic stimulus money from government couldn’t last forever, so it was crucial for our clients to have the proper financial strategies in place. And then:
“Here’s the great news: if you’re our client, the appropriate mix of these strategies has already been explored (if your circumstances have changed, please reach out to consult with us).”
The end of summer brought about a tightening of focus on the US election, and my bold prediction in September’s Marche Monthly, entitled “Trump vs. Biden: My Prediction.”
“As the election nears, I am being asked more and more for my prediction. So, here it is: I predict that not a single stock we own will be affected one way or the other, long-term, by the result of the US presidential election.
“We have Johnson and Johnson, and many other high-quality companies, in our portfolios. I ask myself: will J&J really be affected by who is in office? Will people buy less Polysporin if Biden wins? Or less Lubriderm or Listerine if Trump does?
“The answer is no (although, regardless of the result, more Tylenol could fly off the shelves). Our critical success factor on November 3rd, for the next four years and beyond will not relate to who’s in the White House, but whether we own the right companies and the price at which we bought them.
“Our portfolios continue to outperform the market, with less risk than the market.”
The start of fall was the right time to emphasize how challenging this winter could very well be. Our October Marche Monthly was thus the right time to reinforce our mission: To uncomplicate your life by helping you navigate not just the markets, but also your personal life events.
And so I asked you:
“What’s your winter strategy?
“We each need a personal strategy for getting through winter mentally and physically healthy.
“I am asking you, and I will continue to ask you through these upcoming colder and darker months, in which it will be more difficult to be outside as we did in summer: what are you going through? How are you doing? How can I help?”
I offered a number of hopefully helpful ideas and inspirations here, and I am asking you again now: what are you going through? How are you doing? How can I help?”
Please let me know.
Our November edition was issued while votes were still being counted in the US presidential election and before Joe Biden was declared the winner. Despite the uncertainty, I gave perhaps my most thorough explanation of our ongoing strategy, which is so crucially important:
“No matter what happens, we are sticking with our strategy: own predominantly high-quality, dividend-paying companies in regulated industries. Companies that have strong balance sheets and business models we understand. That is how we design diversified portfolios that withstand the unpredictability of the political and economic environments.
“Our strategy is always driven by your financial plan, which embodies our understanding of what is most important to you. The more deeply we understand those priorities, the better portfolio managers we can be.
“We have been capitalizing, and we continue to capitalize, on the market’s ups and downs by selectively buying, at attractive prices, companies that fit the above criteria. When the market goes up over the long term – as it always does – our careful purchases will truly pay off.
“To boot, we do not even own the market. Because your portfolio is carefully hand-selected, it is not the market – and so it continues to outperform the market.”
In preparation for the year’s final edition in December, I spent some time asking myself: what is the year’s biggest lesson?
I did not have to think long:
“Stay invested.
“This year has taught us a lot of things because it was so tumultuous. But amid all the volatility, in the markets and in our society at large, one lesson stayed absolutely the same: stay invested.”
I pointed out that when markets were plummeting in February and March, many investors wanted to sell everything and go to cash. What would have happened to them? What did in fact happen to many people?
“They would have missed out, in a matter of months, on more growth than the TSX/Canadian stock markets delivered in the last decade. Because as of early December, the market is up 55% from its low point, when many people wanted to, and did, sell (but when we were buying selectively, at deeply discounted prices).”
Now, here we are in a brand-new year. Epitomized by the attack on the US Capitol last week, political and economic uncertainty are greater than ever.
Can you guess what I recommend we do?
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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.
Tyler Marche, MBA, CFP, FCSI
Your life, uncomplicated
tyler.marche@rbc.com
1-416-974-4810
www.tylermarche.com