Spring Market Commentary

Spring Market Commentary

After the rally beginning in December, equity markets have had a tough time for the past month or two; continued fallout from higher interest rates, a series of large-scale banking failures, and the continued concern over an economic “soft or hard” landing.

You may have seen the news that Meta—the parent company of Facebook, Instagram, and WhatsApp—is cutting another 10,000 workers. This follows a mass layoff of 11,000 employees in November and now about 25% of its workforce, the first time ever the company had reduced its workforce.

Amazon announced layoffs affecting 18,000 people in January. Twitter has cut half its workforce since Elon Musk took over. Microsoft is planning to lay off 10,000 workers. The list goes on as higher interest rates grind on profitability.  High tech and especially newer entrants, require low-cost capital to grow and investors are readily willing to fund it for the promise of hefty returns.  

The Federal Reserve’s rapid interest rate increases have pushed up the cost of borrowing and investors are turning to value-based investing instead of growth.  However, there are a good number of excellent businesses in the tech sector and we continue to judiciously favor some high qualify proven ones. 

We nor any of our partners had any exposure to any of the banking woes in Silicon Valley or Credit Suisse.  We continue to focus on quality and quantitative measures to ensure we do our very best to own solid proven businesses with very favourable long-term outlooks.  Recall that any investment in a business (stock ownership) comes with the requirement for patience and a long-term time horizon. This allows you to ignore the short-term pullbacks and the negativity in the press in exchange for the opportunity for excellent above average returns over the next ten-plus years. It is these very investments that help overcome inflation and give a real boost to overall account returns and income sustainability over time. Think at least five and more realistically, ten years as opposed to quarters, when measuring the success of equities.

At some point, interest rates will subside along with inflation.  That does not mean next month but perhaps later this year or next. These cycles take time to return to the norm.  Bonds and other fixed-income investments (which do poorly in a high inflation/rising rate environment) along with stocks should do very well when that easing arrives.

In the meantime, we can all see that pretty much everything costs more.  My own strategy is to reduce discretionary spending.  Try to do the same and save and invest the difference to fund your objectives.  Always take advantage of any options available to reduce your growing tax liability, and let time and compounding work wonders throughout the years ahead.  We have access to many, many wonderful investments to help you grow your wealth, but you need to fund them and let them grow.

As I have said so many times, the best time to buy is when your investments “are marked down”.  For those in retirement, these same tips can help you sustain the extra income you enjoy today so it’s still available throughout your life.

Tax preparation and filing are well underway should you need our help.  Approximately 300 clients have their taxes processed right here at the branch.

We have 23 years of proven success so if you need help or a second opinion, let us know before the CRA deadline of April 30th.

Adam and I and our entire team are here to help. 

Written By: Michael Prittie