Happy New Year!

We thought we’d send a quick review of what happened in the markets last year and discuss a bit of an outlook for 2023.

2022 continued the trend of two previous years as one of “unprecedented times” (are you sick of hearing that yet?)

There was so much uncertainty at this time last year; offices were still empty from the COVID-19 pandemic precautions, a war had just been brought on to Ukraine, inflation was running at levels we hadn’t seen in decades and the central bankers around the globe had not devised a plan on how to tamp it down yet.

All of this uncertainty created a storm in the markets and saw market indices down anywhere from

-8.4% in Canada, -20% in the US, -20% for the World Index, and the NASDAQ “growth index” down -31%.

All of the concerns caused many investors to look for safety “until things settle down”. Things like GICs took center stage; with rates rising these suddenly became an attractive option to some investors.

We all know a recession is coming because the politicians, economists, central bankers and anyone you bump into at the grocery store said so….

If we know that this is happening should we wait until things get better?

The issues we have just discussed are looking at information in the rear view mirror, this is why we never know if we are in a recession until we are already in the middle of one (which we are likely already there).

The stock market, on the other hand, looks forward, anticipates future events, and prices the future cashflow and growth potential of a business.

This is why in the midst of bad news cycles and worsening economic data we often see the market start to go up.

While 2022 proved to be a year of uncertainty in the market we believe that equity markets will begin to look through the clouds and towards the next market cycle setting up good things for high quality businesses in the years ahead.

We will leave you with this:

The rabbit-duck illusion is the centerpiece of a 100-year-old disagreement about what animal it depicts. What do you see? A rabbit or a duck? Like economic data, It’s something that can be interpreted completely differently by different people. The Duck like economist/politicians/central bankers/that person you bumped into at the grocery store is looking backwards at what happened in the past. The Rabbit on the other hand is the stock market always looking forward to find the opportunity.

As always Peter and I are happy to review your accounts and discuss why we continue to remain positive on the long term outlook for global equity markets.

All the best for 2023,

Phil