2022 Year in Review

Written by: Edward J. Mah, Senior Investment Advisor

Despite the market decline, we see 2022 as having been a year of opportunity.

Yes, asset values and thus portfolios have declined for the most prolonged period since the Great Recession of 2008/2009.  That being said, declines in the market have given us opportunities to buy assets on sale, something we will continue to do in 2023, if and when appropriate.  As long-term investors, we know that over time, these assets will increase in value, transforming market declines into returns for our clients.

Bad News is Good News

The current downward trend in the market is not as dire as 2008-2009:  remember that some major financial institutions, such as Bear Stearns and Lehman Brothers, went bankrupt and many others were on the brink, and the major US stock indices declined by 50%.  Here, at the end of 2022, the end to the current downturn is in sight. We are seeing the first signs that inflation may be coming under control.  The equity and bond markets will respond favourably when central bankers, especially at the Bank of Canada and US Federal Reserve, believe that we are heading toward their target of 2% inflation.

The question is not if, but when this will happen. A recession, which is roughly defined as a significant economic downturn, suggests a timeline - and according to our research team, a shallow recession is coming.  We note that the market has already priced in a recession, meaning that asset prices have been lowered before the recession has even arrived. Related, we note that the markets typically look forward 6-12 months and account for future economic trends in its pricing.  And so, we anticipate that in the middle of a recession, should it arrive, the market will be anticipating better times and therefore already be on the rise. 

In short, we see the “bad news” that a recession is coming as having an element of good news:   it means better times are on the way.  In the face of an economic slowdown, central bankers will stop raising interest rates and then likely lower them to stimulate more economic activity, to which both the stock market and bond market will respond favourably.

In my opinion, we are closer to the end of the market downturn than the beginning. And I want to reinforce the important point that we have capitalized on the downturn by continuing to diversify globally and purchasing dividend-growing companies at lower prices, which positions us very well for the long term. Over long time frames, history has repeatedly shown that the market goes up. 

A New Chapter in Our Story

 

 

If you have any questions or concerns at all about your portfolio or any aspect of your financial plan, please do not hesitate to contact us.  As you may be aware, this year we engaged in a branding exercise to better tell our story.  One of the conclusions we came to in that exercise is that ultimately, we are here to care about each other.  About each other here on our team, and even more importantly, about you, our clients. 

That’s what the branding exercise was really all about:  reaffirming our focus on ensuring you feel our caring, so you feel confident in the authenticity of our new brand promise:  Build more with Mah™.

When we say Build more with Mah, what do we mean? We mean that we will help our clients build:

• more wealth, through advice from real human beings who care first and foremost about where you want to go in life – beyond just your finances.
• more knowledge of investing, to give clients the comfort, confidence and courage to stick with the strategy, especially in volatile markets like the ones we’re currently weathering.

It also means that we will build more intergenerational wealth as a business and family, modelling it for our clients as Marissa takes on more responsibility in the business over the next decade as I envision retirement (there is no rush…we are talking about years from now!).

And it means that we will do it all with something that came through clearly in interviews with our clients: our genuine human touch. We are deeply respectful, we are quickly responsive, and we take nothing for granted – especially our clients’ business.

On that note, on behalf of our entire team here at The Mah Investment Group, I want to thank you for our relationship, and for your business – and I wish you the happiest holiday and New Year.