Marche Monthly - December 2021

Dec 17, 2021 | Tyler Marche


Here's what it all adds up to


That’s how the evidence is looking: the Omicron variant is more transmissible, but may cause illness that is less severe. Early evidence also suggests that vaccines may still offer people some degree of protection from it. This has reassured the market that the risk posed in 2022 to the global economy may be smaller than originally thought.

As we have said in past editions of Marche Monthly, as investors we have to be unemotional: we do not care about world events per se, but whether we own high quality, well-positioned companies that can thrive in the present and also any conditions. And the fact is that the companies in our portfolios have already proven they can indeed rise above. Based on what we know about Omicron so far, the companies we own will continue to grow and prosper.

What is our overall view on the year ahead? We think it has the potential to deliver a good year of gains for investors. Rising vaccination rates, and variants that are expected to eventually be less deadly, should gradually take us to a more normal world.

The three most influential external factors that typically drive equity returns in the short term are inflation, growth and the actions of the central banking system (mainly the Bank of Canada here at home and the Federal Reserve in the United States). That said, in accordance with our long-term equity strategy, we place greater focus on factors I will call internal, namely: whether we own high-quality, predominantly dividend-paying companies with strong balance sheets and that operate mainly in regulated industries. Which we do. We own companies that will ultimately thrive in any environment.

In this context, how do we see 2022 unfolding?


Inflation has been going up all year. Here in Canada, it now sits at its highest level since 2003. But here’s something to keep in mind: inflation is calculated as the change between the current year and the year before. In 2020, when the effects of the pandemic were most severe, prices were at their lowest – so it only makes sense that inflation would go up as the economy began to recover in 2021.

As we move through 2022, price levels will be compared to 2021, so inflation should recede in some pockets of the economy. It is possible that supply chain bottlenecks will loosen, and that the very high demand for hard goods (think about all those Peloton machines and backyard decks and hot tubs purchased in the last two years) will lessen and be overtaken by a higher demand for services. In the hospitality industry, for example, as people are increasingly able to travel and visit restaurants. On the other hand, the labour shortage may continue to keep wages higher than they would otherwise be.

Here is the bottom line: if inflation continues to rise, we believe that our positioning of owning predominantly businesses that can pass on price increases to their customers is the best protection. As inflation goes up, so will their earnings and thus dividends.


Growth should be slightly less robust in the year ahead, although it still has the potential to be above average. In 2021, earnings growth from companies around the world was abnormally high. Similar to the reasoning behind this year’s increase in inflation, much of this growth was a result of a rebound from 2020’s declines. Despite this bounce back, economies still have not fully reopened, supply chain issues persist, inventories remain historically low and need to be rebuilt (as anyone doing their holiday shopping knows), and people have unusually high savings and may be eager to spend. All of this points to a positive year of growth in 2022.


In the past two years, “exceptional” is a word that has been used, well, an exceptional number of times. Let’s use it once more to describe the amount of stimulus money provided by the US Federal Reserve and the Bank of Canada since 2020. Because the future direction is clear: less stimulus, and the possibility of tighter monetary policy in the year ahead. While this might create some volatility as the market digests what it all means, we believe it will take time, and several interest rate increases, before it actually dampens economic growth (think 2023 or 2024, rather than next year). If this volatility creates opportunities to upgrade our holdings, we are positioned to do so.


We expect 2022 to be characterized by healthy economic and earnings growth, modestly lower inflation, and an interest rate environment that will remain favourable for consumers and businesses. This should be good news for equity markets, keeping in mind our remarks above that we own businesses we believe will thrive in any environment.

As always, there will be risks, both known and unknown. And, although stock market valuations are what we would describe as being on the more expensive side of history, this does not necessarily suggest there’s an imminent risk to equities.

This is a good time to reinforce the fact that we do not own the market, but instead, a collection of businesses that will outperform the market over time. Our portfolios are significantly cheaper than the overall market which provides us with a margin of safety. For a refresher on both our equity and fixed-income strategies, please see here.


We have always been honoured to serve multiple generations of our client families. In fact, it is our long-time vision that our clients will feel so well listened to and understood, that we earn the business of every next generation.

You have given us the privilege of knowing you well, and of your trust to make discretionary investment decisions aligned with our fiduciary responsibility to you. In short, our interests are always aligned.

Now, a regulatory requirement which we support is presenting you with the option of giving us an additional means of protecting your financial well-being: all of our clients may, if they wish, assign a Trusted Contact Person.

What is a Trusted Contact Person?
A Trusted Contact Person (TCP) is different from an emergency contact. A TCP is someone you give us written consent to contact. We may contact them if we are concerned about your ability to make decisions due to physical or mental incapacity, or if we’re unable to reach you.

We may ask your Trusted Contact Person to provide or confirm information, such as:

  • Your state of mind, if we have reasonable concerns about your ability to make financial decisions.
  • Your current contact information.  For example, you may be traveling and have an alternate phone number we don't have.  Or you may have simply changed your contact information and haven't updated us yet.
What is the role of the TCP?
The role of a Trusted Contact Person’s is to provide or confirm information only – they do not have any authority over your account, cannot make decisions on your behalf, and will not be given access to your detailed account information. We will not ask your Trusted Contact Person for information unless we believe it’s absolutely necessary to help you.

Again, the decision of whether or not to appoint a Trusted Contact Person is completely yours. We will be in touch to discuss if it makes sense for you.


This time of year is always one for reflection. Here at Marche Wealth Management, we are beyond grateful for the trust you have in us to work in partnership both with you and the future generations of your family.

As always, thank you very sincerely. We wish you and your loved ones a safe and happy holiday season and a very Happy New Year!

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