From the Desk of Mark McConnell

Equity markets dipped in early April but bounced back in May. Investors were hopeful for interest rate cuts to boost markets, supported by lower inflation and a positive economic outlook. In June, the Bank of Canada and the European Central Bank cut interest rates, starting their policy-easing cycle. However, the US Federal Reserve Board held off on cutting interest rates due to a strong labor market and sticky above average inflation.

 Market performance continued to broaden beyond information technology to other sectors through the second quarter of 2024.  Corporate earnings continued coming in better than expected and economic growth, though slightly slowing, remained in good shape.

Investors had lots to cheer for in the first quarter of this year. Equities posted stellar returns, U.S. corporate earnings were strong, AI continued to excite and there was optimism that interest rate cuts are getting closer.

U.S., Canadian and global equities climbed steadily through January, February and March to end the quarter with a fifth straight month of gains. U.S. and Japanese equities in particular posted record highs. Bond markets saw U.S. and Canadian yields rise through January and February on strong economic growth before moving lower at quarter-end after the Federal Reserve of the United States (the Fed) reaffirmed its commitment to rate cuts this year.

To invest successfully over a lifetime does not require a stratospheric IQ, unusual business insights, or inside information.  What’s needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework.

If you aren’t willing to hold a stock for 10 years, don’t even think about holding it for 10 minutes.

                                                                       -  Warren Buffett, Chairman Berkshire Hathaway

                                                                           (the Oracle of Omaha, net worth $121 Billion US$)

Dear Friends,

The beginning and the end of 2023 were like night and day for investors. The year started with much trepidation after a turbulent 2022, but ended with increased optimism as inflation eased and equities posted handsome returns.  The ups and down of the market this past year is why I included these words of wisdom from Warren Buffett.  In summary, every successful investor needs a rational framework for investing and to keep emotions in check.  And every investor needs to think about the long term prospects of the companies and the investments that they are selecting for their portfolio.    

“The longer you can look back, the farther you can look forward.”

-                Winston Churchill (speech, March 1944)

After strong back-to-back first and second quarters, the good run investors have had in 2023 temporarily came to end in Q3 as interest rates, inflation and a slowing economy reined in the market recovery.

U.S., Canadian, and global equities began Q3 confidently, climbing through July but then faded through August and September to finish in the red. Year to date, the equity markets remain in positive territory. Bond markets saw U.S. and Canadian yields rise in August after Fitch credit rating agency downgraded U.S. debt and then in September on inflation and rate announcements by both the Federal Reserve Board in the U.S. and the Bank of Canada.

As a gentle reminder to investors who have likely seen some ups and downs in the markets over the past few years, I am quoting two heavyweights in the investment world.  Jeremy Siegel is the Professor of Finance at the Wharton School of the University of Pennsylvania, a well known author and a leading current commentator on CNBC, CNN and NPR.  Benjamin Graham was the father of value investing, author of Security Analysis and The Intelligent Investor, professor of Finance at Columbia Business School and taught Warren Buffett (CEO of Berkshire Hathaway and as of June 2023, the 5th richest person in the world).  The core of what these 2 investment gurus are saying is don’t let emotion, either negative or positive, erode your investment framework.

Investors had lots to cheer by the end of the first 3 months of 2023 as stocks rallied, bond prices rose, interest rate hikes by central banks slowed and inflation cooled down again. It’s a promising start to 2023.  But much like March Madness in NCAA college basketball, there were a few shocks along the way!

Equity markets dipped in February over concerns “hot” economic data coming in might mean Fed interest rates having to stay higher for longer. Then in mid-March there were headlines made as the U.S. regional banks Silicon Valley Bank and Signature Bank were forced to shut down.  These closures dragged down banking stocks around the world.  The fallout of this bank run spread overseas, affecting the ongoing operations at Swiss banking giant Credit Suisse (which was bought by their Swiss bank rival UBS). However, following a coordinated response by central banks to maintain market functionality, liquidity and protect deposits, Canadian, U.S. and global equities recovered to wrap up Q1 with impressive gains. The tech sector led the way, offsetting much of the negativity in the banking sector.

Investors experienced a turbulent ride in 2022.  Inflation, central bank rate hikes, oil prices, supply chain disruptions and the Russia-Ukraine war cast a long shadow on markets, causing extreme volatility and dominating financial headlines 24/7.  As stressful as this has been, the worst is now likely behind us.

From April 1st to June 30th was, to say the least, an eventful quarter. Lingering inflation, tightening central bank policy, high oil prices and geopolitical tensions were top of mind for investors during the last quarter, which is basically where we left off at the end of March 2022 as well.

U.S., Canadian and global equities swung back and forth on market volatility, one moment turning bullish on employment news and company earnings reports, and the next turning bearish on interest rate and inflation worries. Finally the equity markets ended the 2nd Quarter in a lower position. Equities were dragged down by uncertainty surrounding inflation, the ongoing pace and size of interest rate hikes and the ongoing Russia-Ukraine conflict. In bond markets, U.S. and Canadian yields, which move in the opposite direction to bond prices, continued to rise throughout Q2 on forecasts for slower economic growth, but dipped at the end of June.

I hope this email finds you in good health and spirit. I usually end my MARKetS REPORT with thanks and reminders of important events, but I thought I would mix it up a bit and start with a big THANK YOU to my clients for continuing to place their trust in me and my staff. We are here to help you and your family through both calm markets and financial uncertainty. We want to help you plan for your upcoming retirement and help you save for your child’s (or grandchild’s) education. We have also been extremely pleased that so many of you have referred your friends and loved ones to our services this year. Thank you, again, thank you!

2020 was a year none of us will soon forget...even though most of us would sure like to. Financially speaking, the year started strongly, with equity markets at all-time highs and unemployment near record lows. But by mid-March, a new coronavirus had reached North America after emerging overseas in late 2019. As you well know, governments around the world abruptly shuttered their economies and issued shelter-in-place orders in an effort to slow the spread of the disease – resulting in sharp and drastic declines across major stock indexes globally.

It has now been more than six months since the World Health Organization declared the global COVID-19 pandemic, upending our home and working lives. As the initial wave of infections subsided and the spread of the virus stabilized through the summer months in most parts of Canada, we adapted to the “new normal.” Heading into the fall, infection rates in some provinces are rising again, raising the possibility of further restrictions to limit the spread of the virus. Amidst the ongoing uncertainty, I hope that you and your family are keeping well.

I hope that you, your family, friends and your loved ones remain well during this unprecedented time. After a truly unique quarter for capital markets, I am writing to provide you with a brief overview of some key developments during that time, as well as some insight on what can be expected as we head into the next three months of the year.

The first quarter of 2020 was unlike any we have seen in a very long time. In response to the pandemic and the social distancing and lockdown measures that have affected over one-third of the world’s population, global capital markets declined sharply. Energy prices also weakened significantly as a result of a price war between Russia and Saudi Arabia, further affecting the shares of energy companies and adding to the general atmosphere of anxiety in the markets.

Dear Client,

Financial markets have exhibited high levels of volatility over the past several weeks as they react to factors that include reduced interest rates, a steep decline in oil prices and the economic and business implications of the coronavirus (COVID-19) outbreak. I am writing today to provide you with some further perspective on these developments and what the market’s fluctuations may mean for your investments in the longer term.

Dear friends,

Welcome to a new year and a new decade. In this letter, I would like to provide you with a brief overview of some key investment market developments over the past quarter and for 2019 as a whole, as well as some insight into the factors that may affect markets in the coming months. The year 2020 will mark my 26th year in the financial industry.  And this broom has seen a lot of dirt, especially in the corners.

I hope you had a great summer and have the opportunity to enjoy some pleasant fall weather as we head into the final few months of the year. I am writing to bring you up to date on some key market developments over the 3rd quarter of 2019 and to provide some context for how your investment portfolio may have performed during those past 3 months ending on September 30th.

 Finally, and happily, spring is here.  Global capital markets have rebounded strongly to post mainly positive results for the first quarter of 2019.  

Dear Client,

In contrast to the relative market calm of 2017, volatility returned to equity markets in the first quarter of this year. Most global markets dropped sharply in early February, with some falling into correction territory (a decline of 10% or more). The initial decline was apparently due to market participants’ concern about rising inflation based on strong U.S. economic data.