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Market Update| Continue to Look Forward| December 20, 2021

Kevin Becker - Dec 20, 2021
With only two weeks left in 2021 it should give us pause to review what has happened last year and also what to look forward to in the coming year.

I do hope this newsletter finds you set and ready for the holiday season, I have been trying to finish off some last minute shopping (leaving it till the end again) and have found the mall activity picking up and also some supply shortages. That being said, there is still another week of market activity to look forward to and we will have to see if a Santa Claus rally is in the cards for the end of 2021.

Looking at the markets, The S&P 500 is down ~1% last week with the main culprits being concerns about the Omicron variant spreading exponentially and further stimulus removal from world central banks. Indeed, the Bank of England raised its lending rate by 15 basis points to 0.25%, the Norges Bank by 25bps to 0.50% and Banco de Mexico by 50bps to 5.50%. As for the Fed, the new dot plot indicates three rate hikes in 2022 and 2023, and two hikes in 2024. Otherwise, despite a more hawkish Fed and stronger-than-expected inflation data, bond yields surprisingly declined ~10bps, a signal from investors that a policy mistake may be embedded in the numerous forward rate hikes the Fed’s new dot plot projects. Elsewhere, commodities held steady and the rebound in gold(s) could indicate that rate-hike fears are finally priced in. It will be interesting to see if the mid-December to end-of-January seasonality holds. For sure, the decoupling between gold(s) versus real rates and economic momentum provides a bullish backdrop. Also, could a break of the bitcoin below its 40-week moving average be another catalyst?

Again, with only two weeks left in 2021 it should give us pause to review what has happened last year and also what to look forward to in the coming year.

Continue to Look Forward

“The progress of mankind has been incredible and that won’t stop. There will be interruptions that will occur from time to time…and I also know that we’ll come out better on the other end.”

— Warren Buffett

As we look to the year ahead, the words of legendary investor Warren Buffett may be worth reflection. During the height of the pandemic, he offered his optimistic view on overcoming the impending challenges.1

For many, this may be the first time that we can visualize a world not bound by the dominance of the pandemic. The hope is that we will be able to move forward, perhaps a bit more resilient than before.

These lessons in resilience may be helpful in supporting the investing journey. The pandemic has created new challenges for economies and financial markets: growing levels of government debt, ongoing supply chain issues, the likelihood of rate increases by central banks and persistent inflation. Keeping balanced expectations may be made more difficult given the uncertainties.

It is instructive that even in the face of such unprecedented times, last year’s equity market performance was strong. This should remind us that sitting on the sidelines is not a prescription for growth. If we are to prepare for the financial future we want, we must participate and continue to look forward.

We should also never underestimate the capacity of companies, economies and the markets to persist and advance. This past earnings season is one such reminder. Many companies continued to post strong earnings despite unprecedented conditions — partial economic shutdowns, labour shortages, supply chain issues and rising input costs — and some at record levels.

As a testament to this resilience, market strategist Ed Yardeni recently published a series of data that shows how the world has generated unimaginable wealth since the 1940s.2 Of particular note is the tremendous growth in corporate profits — an upward trajectory over time, despite many short-term setbacks. Even during the global financial crisis of 2008-09, when a deviation occurred, it is notable how quickly this reverted and continued its upward climb.

Market uncertainties will always be with us in some form or another. However, portfolios built on a solid foundation, using securities selected with quality, diversification, strategic asset allocation and individual needs in mind, will often prove to be enduring within the ever-changing investing landscape.

In looking forward, let’s expect the best, knowing that we have this plan in place to guide our investing. Here’s to a healthy, happy and prosperous 2022 and beyond!

The Influencers, with Andy Serwer. March 13, 2020; 2. www.yardeni.com/pub/sp500marginnipa.pdf

Here’s to bright days ahead! We are hopeful for a return to normalcy in 2022, including being back in the office and reconnecting in person once again. Thank you for your ongoing confidence in our services during this lengthy period of adjustment.

The start of the year brings RRSP season. For those of us who haven’t yet reached retirement, it is a reminder that time continues to pass and retirement quickly approaches. Keep planning for the future!

Wishing you and your loved ones much health, happiness and hope for the coming year.

Take Care,

Kevin