2022

After the market dropped at the start of the pandemic in 2020, I made more stock trades than I had in the previous several years, in alignment with our strategy of buying companies priced below their intrinsic value, preferably – as an offset to inflation – those that pay dividends, and those able to pass along price increases to their customers.

That strategy continued to serve our clients well in 2022, as companies such as Restaurant Brands International, CN Rail and Element Fleet Management have done well, helping us outperform the markets for another year. At time of publication, the S&P 500, which we consider the authoritative indicator of how the markets are doing, is down roughly 20% for the year. Our clients’ balanced portfolios, however, are down 8%.

This is because our clients do not own the market, but instead a selection of assets handpicked by us, always in complete alignment with their financial plan.

On the fixed income side, as mentioned in the July, September and October issues of Marche Monthly, for the first time in 15 years we were buying longer-term bonds and GICs. Fixed income investing has been a silver lining of higher interest rates, because they are generating returns we can’t ignore – in the area of 5%.

Have a look at the September issue for an elaboration of our fixed income strategy, and see this edition of Marche Monthly for a good summary of our equities strategy.

2023

We have capitalized on the fixed income opportunity and locked in high yields, and now the window is closing – because interest rates will, before too long, start to drop. Why? Because all of the data is telling us that a recession is on the way for Canada, the United States and indeed for countries around the world. A key driver of a recession is high interest rates, which are, after all, intended to curb inflation by curbing spending, which can lead to a significant decline in economic activity, which are characteristics of a recession. Although the exact timing of a recession is difficult to estimate, we expect it to arrive around mid-year.  In order to offset a recession, central banks will lower interest rates.

And so, in addition to the fixed income story, we have a double dose of optimism for long-term investors. The first is that the markets may decline in the early part of next year, as is common many months in advance of a recession.  Therefore, we will continue to look for underpriced assets – provided they fit our very carefully defined investment criteria – to buy at a discount.

Another cause for optimism is that in the months just preceding a recession, the stock market is expected to start climbing in anticipation of better times ahead, which will increase the value of our clients’ portfolios and make good on our strategy of selectively buying great companies on sale.

The market’s optimism should remind us that recessions do not tend to last long, and that if a recession causes any negative impact on our portfolios, we expect it will be significantly overtaken by the gains that will come after the recession is over. The overall trajectory of the stock market in its very long history has been upward, and recessions have generally been mere blips.

Whatever lies ahead, we remain confident in our strategy and as always, will stick with it.  For 2023 we expect that fixed income and also dividend-paying companies will be important sources of returns, both of which we are well positioned for.

OUR TEAM

We are also confident in the unrivalled team of experts we have to carry out comprehensive wealth management services – which include insurance, financial planning, will and estate planning, advice on trusts, and of course the prudent management of your portfolio and overall wealth for which I am personally responsible.

For our full array of services, see the wealth management “wheel” at the end of this blog, as well as our list of team members.

Early in 2023, 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, and bring to bear the members of our team as appropriate.

THANK YOU, HAPPY HOLIDAYS, AND HAPPY NEW YEAR

It is our honour to partner with you and your family, and at the end of another year, I want to express my gratitude and that of our entire team, for allowing us to continue to earn your trust and confidence.  We hope for you that this holiday season, in light of easing restrictions, you are able to enjoy more togetherness with loved ones and the ability to travel if you wish.  Please carry with you our warmest wishes for your good health, happiness and prosperity in the New Year and always.

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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