2021 promised to be truly unique for investors as we came out of a year that brought the sharpest 30% market correction followed by one of the quickest recoveries ever seen in recorded history. Now that we have a full six months of 2021 data to draw from, let’s look back at some of the major themes from the first half of the year and review our outlook for the remainder of 2021.
INFLATION continues to be the most carefully watched metric by economists and portfolio managers alike. The investment committee at AGF wrote in their mid-year report that “The economic recovery from last year’s pandemic-induced recession gained more steam during the first half of 2021, but given the sheer strength of the rebound in countries like the United States where lockdowns seem like a thing of the past, inflationary fears have now come to the forefront and may play the biggest role in determining the outcome of both equity and bond markets going forward”. A simple example of how inflation can impact the strength of an economy can be seen in the restaurant industry. If 25%+ of restaurants operating pre-pandemic were forced to close their doors permanently then that leaves less room for market competition which historically leads to higher cost of goods and services. In addition to that, if those who did survive are struggling to find workers to sufficiently staff their restaurants then they are forced to serve less customers at a time and therefore charge more for the same hamburger they served 18 months ago. This is by definition inflationary and can be seen across several prominent industries and sectors in the global economy.
VACCINE ROLLOUTS & GOVERNMENT SPENDING were two other key contributors to the global economic recovery and we’ve seen a notable correlation between the efficiency of a country’s ability to get vaccines in the arms of their populations and the pace of their economic recovery. Kevin McCreadie, CEO & CIO of AGF Management Ltd said in a recent interview “What’s been interesting to see play out is the impact that vaccine rollouts in each country has had on economic activity this year – especially when considered in combination with fiscal responses.” Without a doubt, both have factored into the robust recovery in countries like the U.S. and Canada. Not only have we been quick to get shots in arms since the first vaccine approvals but have also continued to lead the charge when it comes to government spending. If you consider Europe, by comparison, its economy slid into a second recession at the beginning of this year and the recovery continues to lag, in large part, because vaccination rates remain relatively low, but also because its fiscal commitment has not kept pace with the U.S. and Canada and may only now be starting to catch up.
RECORD LOW INTEREST RATES continue to provide liquidity for markets and have been a large contributor to the significant increase in real estate values over the last 12-18 months where the average price of a home in Canada increased 18% over last year according to the Canadian Real Estate Association (CREA). While all-time low interest rates have been great for the net-worth of the average Canadian home-owner, they do however have the reverse effect on bond prices as lower interest rates make it challenging for fixed income managers to generate yield and subsequently forcing investors to seek greater risk in order to meet target and/or reasonable rates of return. To be clear though, investors should not be expecting the Fed to raise interest rates this year even if inflation proved more stubborn than anticipated. At this rate, most experts do not anticipate central banks to adjust rates until at least the end of 2022.
THE OUTLOOK for the latter half of the year remains optimistic among the majority of the trusted portfolio managers and experts we talk to regularly. One such manager said recently on a conference call “Bull markets (like the one we’re currently in) tend to last anywhere between 15-18 years depending on the research being cited. So, there’s still a reasonable basis for equities to move higher over the next six months – at least in aggregate. But here’s the caveat: while stocks almost always lead the economy into and out of recession, the magnitude at which they have done so this time around suggests more volatility may be on the way.
Updates & Reminders
- We Want to Hear From You!
Providing an exceptional service has always been the top objective for our team here at Perfect Timing Family Wealth. We are always looking for ways to improve your experience with our office and want to hear from you directly in the form of a short and easy-to-complete survey. Your responses will allow us to evaluate our current performance and identify areas for continued improvement. The survey is completely anonymous and should only take 3-4 minutes to complete. We are eager to hear your feedback and therefore will be making a donation to the Daily Bread Food Bank for every survey completed.
Please feel free to contact us by phone or email if you have any questions or feedback on the survey or otherwise.
- Fundex Merger with Investia Financial Services
Effective July 1, 2021, FundEX Investments Inc. merged with our sister company Investia Financial Services Inc. A formal letter was included in your most recent quarterly reporting.
This change is not the result of an acquisition by a third-party firm, it is simply a consolidation of two dealer firms owned by the same parent company. Both FundEX and Investia are proud members of the iA Financial Group family of companies and it has been that way for quite some time. This internal merger will have absolutely no impact on:
- Our relationship
- Your accounts
- Your client portal (Wealthview) access
- The value and holdings of your investment portfolio.
Absolutely nothing is required for you to do on your part at this time. Over the coming weeks you may notice the Investia Financial Services Inc. logo being used in place of the old FundEX logo.
CLICK HERE to learn more about how Investia’s parent company Industrial Alliance Financial Group has earned the trust of clients and partners throughout their over 125 years of experience.
- In-Person Meetings
We are always eager to meet in person and catch up with you and your families and as the province begins to reopen, we are excited to start meeting with more of you face to face again. We also recognize that Covid has changed the way many of us interact and conduct our day-to-day affairs. As such we will be reaching out in the coming months to learn more about your preferences for how you communicate with our team on a regular basis. We are always happy to meet at our office but have seen the benefits of video conferencing and are also ready to meet at a location of your choosing to accommodate your evolving needs.
- Meet Joann
We are excited to welcome our newest team member Joann Ramcharan. Joann joined our team as an Associate in May and comes to us with over a decade of industry experience with another advisory ﬁrm. With over 20 years’ experience in the ﬁnancial industry, Joann brings exemplary interpersonal, communication, leadership and project management skills. She is an excellent problem solver and analytical thinker who is adaptable and ﬂexible to changing priorities and competing demands. She loves to travel and experience new cultures. Joann has already proven herself to be a valuable member of the team and we look forward to introducing her to many of you in the coming months.