It’s easy to think your investment strategy is not working especially when you simply look at “The bottom line”. This phrase refers to clients who look at their statements and judge their investment success by comparing the previous quarter or month numbers to the present. If the numbers are higher, things are great. If the numbers are lower, doubt creeps in causing some clients to trade more often then they should. This week, I thought it would be a good idea to hold myself accountable for the commentary I have been writing to you for the last 2 years. My objective is to draw your attention to the importance of research and why I believe advice matters so let’s begin.
Tuesday evening after my kids went to bed and my wife fell asleep on the couch, I found myself reading my own market commentary dating back about 2 years ago. I started writing my weekly commentary back then but what I discovered turned out to be quite interesting. Side note: If you were receiving my weekly commentary 2 years ago, you can do your research and find my article on November 27 th , 2020, with the subject line “why I believe 2021 Could Be A Great Year For Stocks”.
For all our newbie clients and followers who were not around in 2020, you can find the article below:
Published on: November 27th , 2020 By: Michael Zagari, FCSI, CIM, CIWM
Why I believe 2021 Could Be a Great Year For Stocks.
About 4 weeks to go before we leave 2020 behind us and welcome a new year.
I thought this week I would provide my investment perspectives on why I truly believe 2021 will be a great year to own businesses via stocks and why it is a great time to be an investor. An oversimplification of how I feel going into 2021 would be the equivalent of finding yourself near the end of the 2008 financial crisis with new funds to invest. Exciting times indeed.
It’s important to mention that just because I hold the opinion that stocks could outperform other asset classes does not mean that every single client of mine should dump all their investments and load up on stocks. Investing requires a personalized approach and is not just about what portion of stocks versus bonds you should hold in your portfolio. It is equally important that I understand my client’s comfort level with volatility so that I construct the appropriate capital growth journey for them. Simply put, there are clients who would enjoy a 20% return without paying too much attention to the level of movement throughout the year and there are clients who would not. Investing other people’s money prudently requires a personalized approach and that’s exactly what we do.
Another important factor to consider is if clients have the means to buy price dips that could take place during their ownership of businesses via stocks. To help illustrate this point, imagine for a moment that your portfolio is fully invested and that you are unable to invest new funds. If the value of these businesses suddenly drops 30,40,50%, you might find yourself in a vulnerable situation. In other words, you have no strategy in place to recover except to wait it out. However, if you were to hold a concentrated portfolio of great businesses with the intention to buy the price dips with new funds set aside to invest, your strategy for wealth creation might look very different. Good to time to own stocks? I believe so. Great time for personalized advice? Absolutely.
So why do I think 2021 is going to be a great year for stocks?
First, 2020 has given mostly everyone many things to think about including their acceptance of volatility. But in terms of wealth creation, here is what matters the most looking forward.
For one thing, Donald Trump’s presidency is now temporary. One might add this pandemic may also be temporary and that human innovation and climate change has become more certain. Another certainty is that Joe Biden and Kamala Harris will be the next President and Vice President of the United States of America starting in January 2021.
I believe that medical developments related to the fight against COVID-19 will accelerate in 2021. The vaccination process of the human population will begin which could also mean a significant reduction of uncertainty.
In terms of climate change, global governments are now synchronizing their efforts which could lead to a proposition of investing in socially responsible investments – companies who seek to consider both financial return and social/environmental good.
Have you ever heard the acronym T.I.N.A. before? (There Is No Alternative)
Interest rates on global government bonds are anchored in a low range thanks in part to high public debt. Central banks are best described as ALL IN and seem willing to finance further deficit spending. One of the effects of all this added liquidity or “printed money” is higher asset prices with lower yields. This means that GIC’s, 10-Year bonds and cash will pay you next to nothing so unless you want to sit on the sidelines and collect a historic low level interest rate, you might be attracted to adding stocks to your holdings.
What is this week’s takeaway?
It seems that either investors accept short term volatility which is already a normal and healthy component of capital markets, or they accept historic low rates of returns from their GIC’s bonds and cash.
These simplified yet compelling reasons are why I believe 2021 could be a great year for stocks.
End of Article
In hindsight, 2021 turned out to be a great year for stocks including Bitcoin. The performance numbers for different asset classes are provided below by Visual Capitalist.
On February 18 th , 2022, I wrote an article called “Quitting on Quantitative Easing” that’s worth checking out. You can find the link to the article here – https://mzagari.io/quitting-on-quantitative-easing/
In the article, I discuss how the federal reserve is likely to reduce liquidity in the markets by raising interest rates with the hope that inflation will come down. Further into the article, I recommend to my readers that loading up on cash to eventually buy the price dips could be worth considering.
Below you will find BlackRock’s Asset Class Map as of December 1 st , 2022, showing the best performing asset classes. Cash is the 3rd best performer so far.
Now you might be thinking, “that’s great, you nailed your predictions for 2021 and 2022 but my portfolio is down on the year so what is the benefit?”
The benefit is research matters and that its not about timing the market.
With research, strong client and advisor communication channels and having conviction with your recommendations can go a long way. It’s also about sharing your opinions with the world and being open to criticism.
Anyone can pick the best performing investment when looking back a few years but where is the benefit in that approach?
Instead focus on your investment framework and hold your convictions.
Have a great weekend everyone! Talk soon, Michael
Disclaimer:
This publication contains the opinion of the writer. The information contained herein was obtained from sources believed to be reliable, but no representation or warranty, express or implied, is made by the writer, Mandeville or any other person as to its accuracy, completeness or correctness. The information is for informational purposes only and is not intended to constitute investment, financial, legal, tax or accounting advice. Many factors unknown to us may affect the applicability of any statement or comment made in this publication to your particular circumstances. Hence, you should not rely on the information in this publication for investment, financial, legal tax or accounting advice. You should consult your financial advisor or other professionals before acting on any information in this communication.
Insurances: Insurance products and services are offered by Mandeville Advisors licensed as life agents through Zagari, Simpson & Associates Inc. Your Mandeville Advisor will ensure you understand which company you are dealing with for the products and services offered to you.
IIROC and CIPF Membership: Mandeville Private Client Inc. is a member of the Investment Industry Regulatory Organization of Canada and a member of the Canadian Investor Protection Fund.
Research Matters
It’s easy to think your investment strategy is not working especially when you simply look at “The bottom line”. This phrase refers to clients who look at their statements and judge their investment success by comparing the previous quarter or month numbers to the present. If the numbers are higher, things are great. If the numbers are lower, doubt creeps in causing some clients to trade more often then they should. This week, I thought it would be a good idea to hold myself accountable for the commentary I have been writing to you for the last 2 years. My objective is to draw your attention to the importance of research and why I believe advice matters so let’s begin.
Tuesday evening after my kids went to bed and my wife fell asleep on the couch, I found myself reading my own market commentary dating back about 2 years ago. I started writing my weekly commentary back then but what I discovered turned out to be quite interesting. Side note: If you were receiving my weekly commentary 2 years ago, you can do your research and find my article on November 27 th , 2020, with the subject line “why I believe 2021 Could Be A Great Year For Stocks”.
For all our newbie clients and followers who were not around in 2020, you can find the article below:
Published on: November 27th , 2020
By: Michael Zagari, FCSI, CIM, CIWM
Why I believe 2021 Could Be a Great Year For Stocks.
About 4 weeks to go before we leave 2020 behind us and welcome a new year.
I thought this week I would provide my investment perspectives on why I truly believe 2021 will be a great year to own businesses via stocks and why it is a great time to be an investor. An oversimplification of how I feel going into 2021 would be the equivalent of finding yourself near the end of the 2008 financial crisis with new funds to invest. Exciting times indeed.
It’s important to mention that just because I hold the opinion that stocks could outperform other asset classes does not mean that every single client of mine should dump all their investments and load up on stocks. Investing requires a personalized approach and is not just about what portion of stocks versus bonds you should hold in your portfolio. It is equally important that I understand my client’s comfort level with volatility so that I construct the appropriate capital growth journey for them. Simply put, there are clients who would enjoy a 20% return without paying too much attention to the level of movement throughout the year and there are clients who would not. Investing other people’s money prudently requires a personalized approach and that’s exactly what we do.
Another important factor to consider is if clients have the means to buy price dips that could take place during their ownership of businesses via stocks. To help illustrate this point, imagine for a moment that your portfolio is fully invested and that you are unable to invest new funds. If the value of these businesses suddenly drops 30,40,50%, you might find yourself in a vulnerable situation. In other words, you have no strategy in place to recover except to wait it out. However, if you were to hold a concentrated portfolio of great businesses with the intention to buy the price dips with new funds set aside to invest, your strategy for wealth creation might look very different. Good to time to own stocks? I believe so. Great time for personalized advice? Absolutely.
So why do I think 2021 is going to be a great year for stocks?
First, 2020 has given mostly everyone many things to think about including their acceptance of volatility. But in terms of wealth creation, here is what matters the most looking forward.
For one thing, Donald Trump’s presidency is now temporary. One might add this pandemic may also be temporary and that human innovation and climate change has become more certain. Another certainty is that Joe Biden and Kamala Harris will be the next President and Vice President of the United States of America starting in January 2021.
I believe that medical developments related to the fight against COVID-19 will accelerate in 2021. The vaccination process of the human population will begin which could also mean a significant reduction of uncertainty.
In terms of climate change, global governments are now synchronizing their efforts which could lead to a proposition of investing in socially responsible investments – companies who seek to consider both financial return and social/environmental good.
Have you ever heard the acronym T.I.N.A. before? (There Is No Alternative)
Interest rates on global government bonds are anchored in a low range thanks in part to high public debt. Central banks are best described as ALL IN and seem willing to finance further deficit spending. One of the effects of all this added liquidity or “printed money” is higher asset prices with lower yields. This means that GIC’s, 10-Year bonds and cash will pay you next to nothing so unless you want to sit on the sidelines and collect a historic low level interest rate, you might be attracted to adding stocks to your holdings.
What is this week’s takeaway?
It seems that either investors accept short term volatility which is already a normal and healthy component of capital markets, or they accept historic low rates of returns from their GIC’s bonds and cash.
These simplified yet compelling reasons are why I believe 2021 could be a great year for stocks.
End of Article
In hindsight, 2021 turned out to be a great year for stocks including Bitcoin. The performance numbers for different asset classes are provided below by Visual Capitalist.
performed-in-2021/
On February 18 th , 2022, I wrote an article called “Quitting on Quantitative Easing” that’s worth checking out. You can find the link to the article here – https://mzagari.io/quitting-on-quantitative-easing/
In the article, I discuss how the federal reserve is likely to reduce liquidity in the markets by raising interest rates with the hope that inflation will come down. Further into the article, I recommend to my readers that loading up on cash to eventually buy the price dips could be worth considering.
Below you will find BlackRock’s Asset Class Map as of December 1 st , 2022, showing the best performing asset classes. Cash is the 3rd best performer so far.
charts/return-map
What is this week’s takeaway?
Now you might be thinking, “that’s great, you nailed your predictions for 2021 and 2022 but my
portfolio is down on the year so what is the benefit?”
The benefit is research matters and that its not about timing the market.
With research, strong client and advisor communication channels and having conviction with your recommendations can go a long way. It’s also about sharing your opinions with the world and being open to criticism.
Anyone can pick the best performing investment when looking back a few years but where is the benefit in that approach?
Instead focus on your investment framework and hold your convictions.
Have a great weekend everyone!
Talk soon,
Michael
Disclaimer:
This publication contains the opinion of the writer. The information contained herein was obtained from sources believed to be reliable, but no representation or warranty, express or implied, is made by the writer, Mandeville or any other person as to its accuracy, completeness or correctness. The information is for informational purposes only and is not intended to constitute investment, financial, legal, tax or accounting advice. Many factors unknown to us may affect the applicability of any statement or comment made in this publication to your particular circumstances. Hence, you should not rely on the information in this publication for investment, financial, legal tax or accounting advice. You should consult your financial advisor or other professionals before acting on any information in this communication.
Insurances: Insurance products and services are offered by Mandeville Advisors licensed as life agents through Zagari, Simpson & Associates Inc. Your Mandeville Advisor will ensure you understand which company you are dealing with for the products and services offered to you.
IIROC and CIPF Membership: Mandeville Private Client Inc. is a member of the Investment Industry Regulatory Organization of Canada and a member of the Canadian Investor Protection Fund.
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