Market Dispatch • September 2022

Chris Raper, CIM, CFP® | Co-Founder, Senior Wealth Advisor, Cross Border Specialist

Aspira’s Timely Market Dispatch – as at close of business Monday, September 26, 2022

The What – both fixed income and equity markets have been hit hard. Year-to-date performances are:

  • S&P TSX Composite Index - 13%
  • S&P 500 Index - 23%
  • NASDAQ Composite Index - 31%
  • iShares Aggregate Bond ETF - 16%

The Why

  • Interest rates are up (maybe even more than you think), and investors believe they are going higher still as the world’s central bankers attempt to rein in inflation.
  • Thus, stocks have a new competitor. By way of example, this morning, our very best rate on a $1.0M GIC was 4.8 per cent for a one-year term, whereas a five-year term was 4.90 per cent. A year ago, we wouldn’t have even made the inquiry.
  • Most investors, the closet indexers, are in a house of pain. If you are an adherent to the retired person and pension standard of 40 per cent Aggregate Bond and 60 per cent S&P 500 Index investment allocation, your year-to-date returns are pegging in at roughly -20 per cent, before costs! If you are a NASDAQ investor (aka technology), it is even worse.

The Where – as in where are we different?

  • Our strategies do not own the full spectrum of companies/industries represented by the S&P 500. Our company-by-company selection process is based on the best shareholder management teams, the best competitive advantages, the best industry tailwinds and the best rent cheque (dividend) growth we can find. We believe they will do better than broad markets in the long run.
  • Our clients who are now in distribution mode have many months to years of spending requirements set aside. Time is on their side.
  • Our ownership of companies that do well during inflationary times (commodity producers) has not only been our best performers, but we continue to see those companies as the least expensive across our entire roster.

The When – as in when will it get better?

  • Unknowable, but we do know that investors are terrified, and historically speaking, these are contrarian indicators. We advocate with Buffett, “Be greedy when others are fearful”.
  • Not unlike July’s low, this past week saw all sectors coming under heavy selling pressure, which points to a potential exhaustion move, aka selling climax.
  • We remain firmly committed to our mantra, investor behaviour is the #1 determinant of lifetime returns. It dwarfs all others. Joining the crowd in a panic, while comforting in the short term, tends to destroy capital and thus livelihoods in the long term.

The Who

It takes both of us to get through these tough seasons. Yes, they are not as much fun as when markets are roaring north, but enduring these times is a necessary price to long-term success. The companies we are invested in continue to pay their dividends, and we have seen multiple cases of strong double-digit growth. We remain confident that this too shall pass. In the interim, we focus on making the most of the opportunities we are presented with. If you have money to invest, please reach out now and not when you’re feeling buoyant. By then, the best opportunities will have passed.

We will be back to you not later than Friday, October 14, 2022, with another edition of The Quarterly Opportunity update with our 2022 third quarter investment performances for each of the in-house strategies we manage. Please reach out if we can help in any way.