March 2022 - Monthly Update
Ian Peebles - Mar 01, 2022
Trust this note finds you and your family well as we approach the first official day of spring.
Your investment portfolio declined in February. It remains with positive performance over the past 12 months.
Given the backdrop of conflict in the Ukraine, it is not surprising that stock markets are not currently reflecting the domestic strength of the North American economy and its trend of growth.
Stock indices in the United States (U.S.) are undergoing a correction (which is defined as a decline of more than 10% from their all-time high). This short-term pricing is occurring within the larger cycle of U.S. economic growth - projected to expand by over +4% in 2022 and beyond.
The drivers of U.S. growth are the same as they have been over the last year; unparalleled financial strength at both the corporate and household levels, a strong domestic economy and robust job market.
Overnight interest rates have begun to go up. This transition reflects economic strength in North America and will continue over the next couple of years. There will be less pressure to increase interest rates the longer the price of gasoline remains at high levels.
We expect the months ahead to remain volatile with larger than typical adjustments up and down for investment markets. As always, we have a plan to navigate these challenging times.
You and your investment portfolio are in a strong position and well insulated during this time of renewed instability.
Bonds and defensive/domestic sectors are doing well. Periods of uncertainty are where long-term investors like us find opportunities to buy or add to world class businesses at a discount. We expect to continue to be active in the months ahead during this turbulent period inside a wider cycle of growth.
Our investment strategy remains sound and unchanged: Own a diversified group of high-quality U.S. and Canadian investments that pay dividends or interest. These are companies that are central to the economy. They will see their influence grow and their market share increase as we work our way through the challenges of today to emerge bigger than ever.
The view from Brian Belski, BMO’s Chief Investment Strategist:
“It Has Been a Painful Start to 2022, but This Too Shall Pass. The S&P 500 fell 3.1% in February, marking one of the worst two-month starts to a calendar year on record. Persistent inflation, rising yields, and impending monetary policy tightening have been the major concerns among investors, but Russia’s invasion of Ukraine last week brought geopolitical fears to the forefront , pushing US stocks into correction territory for the first time since March 2020. To be clear, we remain confident in our bullish outlook for 2022 despite the recent price weakness , as we have yet to see any material changes in the fundamental backdrop of US equities to suggest there is significant trouble on the horizon. In addition, while the duration and scope of the Russia/Ukraine conflict are not fully known, our work shows that , historically, geopolitical-induced market weakness tends to be short-lived. During times like these, we advise investors to focus on what they can control and maintain their discipline and process rather than letting bear market rhetoric influence decision-making. We continue to suggest investors tilt portfolios toward high quality (companies with consistent earnings growth, strong balance sheets and cash flow , and steady operating performance), while focusing on dividend growers to combat periods of uncertainty… Despite heightened geopolitical risk and uncertainty facing the market and the world, the S&P/TSX posted a modest 0.1% gain in February, meaningfully outperforming the S&P 500 and the NASDAQ… Overall, Canada’s strong relative value position and significant weight in the Energy and Materials sectors have helped the market withstand recent volatility… We continue to believe Canadian equities can post double-digit growth in 2022, even as the market transitions to a more earnings-driven environment and faces greater bouts of volatility.”
Stocks in your portfolio that made a new 52 week high this past month:
TD Bank*, Telus*
Stocks in your portfolio that made a new 52 week low this past month:
Borg Warner (No longer part of the portfolio)
The Loonie was unchanged versus the U.S. dollar to:
$0.79
Thank you and all our best,
Ian, Gab & Kaitlyn