Looking Back…

As many of you know I’m fairly involved in my kids’ sports, having coached for many years; not to mention the countless car rides to and from sports events. These long drives always offer an opportunity for my kids and I to stumble onto some very important conversations about life. One of the things I’ve tried to emphasize to them is that it’s really important to take a look back before you make decisions.  The past can be a very important reference point in many ways, not the least of which is referencing where you began the journey. As this newsletter is concerned, I always find it enlightening to see what was important a year ago: what I was right about, what I wasn’t, and of course the very large ‘serving’ of perspective that comes with time.

The signs were there…

One of the more obvious things we were talking about a year ago was COVID, in fact a new ‘variant” had just been found. While that theme hasn’t disappeared, it’s probably accurate to say that the endemic phase has begun, and we are learning to live with the virus.  As for the major theme of 2022… well, that title likely goes to inflation…a word that was just starting to be spoken of a year ago.  What’s changed is that any hope of it being “transitory” ended with Russia invading parts of the Ukraine. Inflation rose so sharply that the last 12 months brought us the fastest rate hikes in North American history, as central bankers scrambled to protect their respective currencies. I also spoke of companies growing impatient with Chinese supply chain issues. 2022 gave us a clearer look, introducing to us the idea of reshoring. This, in turn, led some politicians to adopt the term of “friend shoring” in an effort to flex some political muscle, but perhaps more importantly, forge trade routes with countries that share similar ideologies. This is an important point…there are risks and costs associated with all trade…we are just beginning to see how they can affect things. Imagine being a purchasing manager, tasked with sourcing the best but also cheapest semiconductors for your company’s new “smart” line of pickup trucks. Cheap is important yes…but if you can’t get the component…well…not being able to sell trucks is likely far more costly both from a revenue and reputational perspective.  Make no mistake, reshoring has been our best performing theme this past year and it is certainly looking like it will accelerate as 2023 comes into focus.

A View Forward…

Clearly, it’s hard to predict the future. I can’t imagine that too many prognosticators had “War” on their bingo cards for 2023. So again, take these thoughts with a grain of salt.  As it looks right now however, inflation is in the process of being ‘tamed’. Central banks around the globe have been all but forced to raise rates in line with the USD (this reduces ‘inflation exporting’). That process in itself will create many consequences.  2023 will likely usher in the most telegraphed recession in history…what we don’t know is to what extent this slowdown will happen. So, while 2022 was an ugly year for fixed income investors, I can only think that 2023 will be a much more ‘regular’ year in that space. On the equity side, while I suspect this year will finish with some volatility, I can’t help but think that we may get some surprises in terms of the resiliency of the consumer, and the North American economy. This should be good news going forward for many investors. It’s fairly clear that 2023 will more than likely see and end to rising short term interest rates and could even usher in some interest rate cuts…albeit much later in the year. Either way, the market continues to look forward…as it always does.  This means it’s even more incumbent on investors to have perspective when investing.

With Best Wishes…

It always seems to me that as you get closer to the Holidays, time becomes very short in supply. As the saying goes…time flies. With all the news that happened in the past year, it seems like 2022 went by in a blink. There’s a lot that went on…insurrections, invasions, and investigations among many other events. I can’t think of another year that had so many unforeseen things happen. I guess we really never know what’s around the corner. So, with that in mind, we (Angela, Helen, Shelley, and Mike) want to wish each and every one of you an incredible Holiday season and all the best in the New Year.

"Life can only be understood backwards; but it must be lived forwards." Søren Kierkegaard