LAST JANUARY
Do you remember how rough the markets were in January of last year? Here’s what I wrote in that month’s edition of this blog:
“As of last week, the NASDAQ was down 13% this year, the S&P 500 was down 9% and the TSX was down 5%.
“Good thing we don’t own the market. That is why, amid a market correction, our clients’ portfolios are approximately even – significantly outperforming the market.”
THIS JANUARY
Well, here we are in January of 2023, and we still don’t own the market. Instead, as our client, you own a portfolio selected specifically for you, in full alignment with your customized financial plan. This personalization is one key pillar of our long-time investing strategy. Another pillar is our constant surveying of the market, especially amid volatility, for high-quality assets – those which fit our investing criteria – that we consider to be underpriced.
That is why, early last year when the NASDAQ was down, we saw value in various growth stocks and added companies such as Alphabet, Amazon and Disney to our portfolios. This year, the NASDAQ is up almost 9% so far, and those three new purchases are up approximately 11%, 17% and 24% year to date, respectively.
There is another proactive step we took last year that is now paying off. For the first time in 15 years, we bought longer-term bonds and GICs. Fixed income investing was a silver lining of higher interest rates, because such instruments were generating returns in the area of 5%. We bought as rates were higher and locked in good prices.
I say that fixed income was a silver lining because we could see that the window of opportunity was closing, because interest rates would soon begin declining – because inflation was beginning to decline and therefore, it would not be necessary much longer for the Bank of Canada to raise rates to slow spending. We still hold this view, and so does the market overall, as demonstrated by the fact that long term bond yields have dropped below 2.9% in anticipation of lower interest rates.
Just days ago, on January 25, Bank of Canada governor Tiff Macklem affirmed this view by raising interest rates a further .25% and signalling a pause in further hikes. The market’s strong performance to kick off the year is an indication that it was expecting this very scenario, which we see as boding well for the performance of our clients’ portfolios moving forward.
The NASDAQ is up almost 9% so far this year, the S&P 500 is up 5% and the TSX 6%. While we do not own the market, these indicators do point toward the fact that our year is off to a positive start. I like the way our clients’ portfolios are positioned, and do not see the need for any changes at this time – but we are always on the lookout for assets we believe are priced below their intrinsic value, or in other words, at a discount.
CHINA IS BACK
A cautionary note on inflation: Amid Covid lockdowns in 2022, the massive Chinese economy ($17.73 trillion USD in 2021), had one of its worst years in almost half a century, growing just 3%, which was far below its government’s target.
But in December, China finally dropped most of its Covid-related restrictions, paving the way for its corporations to produce goods at higher levels of output. This is expected to alleviate pressure on global supply chains, resulting in a lowering of prices and hence a decrease of inflation. At the same time, however, there is the possibility of an increase in demand for suddenly-available goods, which would put upward pressure on prices – but we expect such an outcome to be temporary.
2023 OUTLOOK
Did you see our thoughts on the upcoming year? They are here, in the December 2022 edition of Marche Monthly. In summary, we expect a mild recession, but that the net effect will be positive for our clients’ portfolios, because it is during recessions that financial markets tend to recover. We also remain confident in our strategy for the long term.
IMPORTANT DATES
While we do not see the need for portfolio changes, something that may require action are the key dates coming up. As promised, we will be in touch regarding tax planning opportunities, including maximizing your registered plan contributions and processing prescribed rate loan payments in order to continue taking advantage of the income splitting benefits. On these matters and others, as always, we will bring to bear the members of our team as appropriate.
Here are three especially important dates:
March 1: last day for 2022 RRSP contributions
May 1: last day to file your 2022 personal tax return without penalty
June 15: last day to file your 2022 personal tax return without penalty if you are self-employed
As well, the last day for filing trust tax is 90 days after fiscal year-end – thus the deadline for most trusts will be March 31.
For other key dates, a list of information required to complete your 2022 tax return and a handy list of potential tax slips you may receive from RBC Dominion Securities, please click here.
--
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
WHO WE ARE
Tyler Marche, MBA, CFP, FCSI – Senior Portfolio Manager and Wealth Advisor
Tracy McClure, CPA, CA, CFP – Financial Planner
Joy Loewen – Associate
Jean Jeevaratnam – Administrative Assistant
Karen Snowdon-Steacy, TEP – Senior Trust Advisor
Steve Mogdan, CPA, CA – Financial Planning Specialist
Andrew Sipes, CLU, CFP – Will and Estate Planning Specialist
Alleen Sakarian, LL.B., TEP – Will and Estate Specialist
**To learn about our unrivalled team of experts, delivering Canada’s widest array of wealth management services to our clients, visit our website, here and here.
WHAT WE DO
