U.S., Canadian and global equities ended Q1 on a positive note, posting gains in March, but for the overall quarter, markets were mixed. Geopolitical tensions, rising oil prices, high inflation, supply chain disruptions and central bank policy weighed on most global indices. The energy-rich TSX Composite Index, on the other hand, benefited from the market turbulence.
In bond markets, U.S. and Canadian yields rose on inflation news and expectations of more, larger rate hikes by the Fed and Bank of Canada. The yield curve continued flattening throughout Q1, reflecting tighter Fed interest rate policy and forecasts for slower economic growth.
Following the trucker protests that started in January, Alberta, Saskatchewan, Manitoba, Ontario and Quebec announced the immediate ending or speeding up of the lifting of COVID-19 restrictions. Major corporations started scaling back COVID-19 restrictions as well. National Bank, CIBC and Scotiabank revealed plans to start bringing staff back to Canadian offices. Deloitte became the first major corporation to end its mandatory vaccination policy and masking of employees in Canadian offices.
In March, Canada and the U.K. began talks on creating a comprehensive free-trade agreement. Representatives from both governments stated they were committed to concluding negotiations relatively quickly and having an agreed upon plan in place soon.
U.S. inflation climbed to 7.9%, a 40 year-high, driven by supply chain disruptions, labour shortages and rising energy, food and housing costs. Inflation is also expected to increase further due to the Russia-Ukraine conflict. Fed chair Powell said inflation “is much too high” and “a severe threat”. He noted as the U.S. economy no longer required pandemic-related emergency stimulus, it might be appropriate to raise rates more aggressively to get inflation under control. The Fed hiked rates from near zero to 0.25%, in March, its first increase in three years and signaled six more hikes by year end. Powell stated the Fed was ready to make 0.50% hikes if required.
In Canada, inflation surged to 5.7%, its highest level since 1991, and the eleventh consecutive month above the Bank of Canada’s 1-3% target range. According to Statistics Canada, prices rose across all major components with housing costs contributing the most. In March, just before the Fed, the Bank of Canada raised rates 0.25% to 0.50% for the first time since the pandemic began. Bank of Canada governor Macklem said the economy was now ready to adjust to a normal, higher interest rate setting.
In foreign exchange markets, the Canadian loonie lived up to its reputation as a “petro dollar”, increasing to 80 cents against the U.S. dollar off the back of rising energy prices. Bitcoin moved with mainstream markets but with more extreme swings. The leading cryptocurrency halved in value early in January, compounded by events in Kazakhstan, although it had started to recover by quarter end.
Oil prices, which surged during 2021 as a result of ongoing supply chain chaos and are currently a “thorn in the side” of inflation, were pressured further after Russia invaded Ukraine. In February, the price of oil broke through the US$100 a barrel range for the first time since 2014. It then sky-rocketed toUS$110 a barrel in March, before falling at quarter end on news the U.S. would release a million barrels of oil reserves a day over the next six months to help ease prices.
What can we expect now?
After a stressful start to 2022, there were signs in March that markets are rebounding. More rate hikes are coming to combat inflation, which will likely remain high in Q2, but should cool later in the year as supply chains normalize, prices ease and hopefully peace is restored in Ukraine. After the record-breaking double digit returns of 2021 it’s inevitable the pace of growth will be slower this year. However, economic fundamentals and corporate earnings remain healthy and the post-pandemic recovery continues.
Regardless of where we are in the market cycle, it’s important to take a disciplined approach to investing and stay focused on your long-term financial goals. This strategy helps you keep your emotions out of investing, typically buying high and selling low like many investors do. We recommend you maintain a diversified mix of asset classes in your portfolio to maximize potential returns and minimize risk. Regularly reviewing and rebalancing your portfolio back to the target asset mix we created also ensures it remains aligned with your goals.
Thank you for your continued trust in our team and for the opportunity to assist you in working toward your financial goals. We are with you every step of your investment journey, identifying strategies and opportunities, reviewing performance to keep you on track. Should you have any questions regarding your portfolio, please do not hesitate to contact our office to schedule a meeting.
The information in this letter is derived from various sources, including CI Global Asset Management, Globe and Mail, National Post, Wall Street Journal, MarketWatch, Bloomberg, Reuters, Bank of Canada and Statistics Canada as at various dates. This material is provided for general information and is subject to change without notice. Every effort has been made to compile this material from reliable sources and reasonable steps have been taken to ensure their accuracy. Market conditions may change which may impact the information contained in this document. Before acting on any of the above, please contact us for individual financial advice based on your personal circumstances.
Are you looking for a way to help your kids or grandkids get ahead financially? While a Registered Education Savings Plan (RESP) is one of the most commonly used tools, implementing life and critical illness insurance on a child is another excellent way for you to contribute to their financial future. This is especially the case if an RESP already exists and is being fully funded. Premiums are very inexpensive and guaranteed for life.
The policy can act as a gift that the child can benefit from later in life. Many of these policies include linked investment accounts and/or return of premium features. These benefits are entirely outside of the primary insurance function of protecting against the unexpected and can offer many financial benefits while the child is completely healthy.
To learn more about how these strategies can help you and your family, we invite you to contact our in- house insurance expert, Conor Gfroerer, who is a Certified Health Insurance Specialist (CHS) designation holder at 416-861-9339 or by email at firstname.lastname@example.org
Also, a big congratulations to Conor this month for successfully completing the Certified Financial Planner® (CFP) certification requirements.
We are continuing our effort to expand our team and we feel there is no better place to find the right candidate than within our own network of trusted clients and corporate partners. We are looking for an ambitious individual to assist in overseeing daily administrative and operational requirements of the practice. If you know anyone who may be interested in the role, please feel free to share the link to the listing posted on our website or have them email us directly at WeAreGrowing@perfectiming.com.
All tax slips and receipts were issued by plan administrators and fund companies in March. With only a few weeks left to file for the 2021 tax year, please contact our office at 416-861-9556 if you have not received all of your tax documentation and we can arrange to have duplicates sent to you.