Following the markets these days is enough to make anyone dizzy.
The constant news of disappointment between rising interest rates, inventory issues and high inflation is enough to shake all types of investors so if you find yourself wondering what is going on, or when will this end, know that you’re not alone.
It’s important that I first mention that I have full confidence in our positions regardless of market performance or what stage in life you find yourself today. This comment applies for clients who are retired, not retired and everything else in between. Remember, your portfolio has been customized to your needs and has been personalized. You did not force yourself into a box but rather the box was built around your needs and wants.
Is anything making money these days?
If you invested your entire portfolio into Campbell Soup Co. (CPB), Kraft Heinz Co. (KHC) and Dollarama (DOL), you could say your up on the year.
Everything else except real estate and oil is taking a beating these days, including mega tech companies. Tech giants who pretty much own most of their respective market share, are all down. Yes, I’m talking about Amazon (AMZN), Meta (META) and Microsoft (MFST).
Mickey Mouse and the family at Walt Disney (DIS) are also down.
Balanced investors who own balanced funds have also not been able to fight off these headwinds causing their investments to drop.
Global Supply Chains & Employment
Yes, ports in major cities are starting to relieve the bottleneck that built up over the last year and yes cheap access to money certainly made it easier for us to buy things however it seems we are starting to see relief within global supply chains.
This could be good, or it could be bad. Depends how you view the situation.
Perhaps people are buying less products due to the instability in prices and therefore demand is starting to peak.
Or
Supply chain platforms are simply catching up.
In my opinion, the second scenario is less likely simply because we are facing a job shortage. The people who want to work, want more money to work and the people who can afford to wait for what they want, are waiting.
What will be the catalyst to move the markets? What factor has the potential to ignite a market rally?
We need to see more quarterly earning reports to see if profits are rising so that wage inflation and supply chain constraints are less impactful.
Today, the job market is hot, and employers are forced to pay up on wages to maintain employees otherwise they risk disrupting future growth. Higher expenses plus higher borrowing costs as interest rise are both factors likely to negatively affect stocks UNLESS the business generates more revenues and can absorb wage growth and higher borrowing costs. In other words, if the companies we own sell more widgets at a higher price and the demand for these widgets stay the same, companies can grow causing future earnings or expectations of future earnings to spike. What we want to see is a year over year comparison where revenues, operating income and net revenues show a trending increase.
At that point, the average investor will start to look at the 40 – 80% stock price discounts as an attractive entry point to get back into the market. If that happens, the floodgates of capital may start to flow back into the capital markets. No one wants to miss the rebound plus this would be very good for stocks. Therefore, parking as much cash in your investment portfolio as possible is so important. Afterall, a rebound feels nice for everyone but even more so for investors who bought at or near the bottom. This is where an enormous amount of wealth can be created.
My advice
Today, I believe our best option is to sit on the cash and/or load up or make more cash available. Many of my clients are already positioned like this so no action on their part is required.
For others, today may be a good time to add to your accounts especially clients who are 10 years plus away from retiring. As I mentioned in one of my weekly blog posts, your purchasing power to buy growth stocks is 3 times more powerful than it was one year ago from today. This means you can buy 3 times the number of shares of a business than you could in early 2021.
Consider this
In 1997, the share price of Amazon was $18 when it went public. If you had invested $5,000 in that IPO and bought 277.77 shares that day, your investment would be worth nearly $11.4 million dollars today.
That was 25 years ago.
Many of my clients have been investing for more than 25 years and yet they have not turned a $5,000 investment into $11 million dollars. Clearly, buying the dip combined with a holding period of 25 years has not been the popular strategy.
In market environments like what we are experiencing today, loading up on cash with the anticipation of buying more shares of businesses we want to own for the next 25 years could be a passage towards happier days ahead.
Have a great weekend everyone!
Talk soon,
Michael
Disclaimer: Nothing on the website shall be construed as an offer to buy or a solicitation of an offer to buy any services or products. Commissions, trailing commissions, management fees and expenses may be associated with investments. Products are not guaranteed, their values change frequently and past performance may not be repeated. Mandeville Private Client Inc. is a member of the Investment Industry Regulatory Organization of Canada and a member of the Canadian Investor Protection Fund.
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. This publication is not an offer to sell or a solicitation of an offer to buy any securities. The information in this publication is intended for informational purposes only and is not intended to constitute investment, financial, legal, tax or accounting advice.
I do not hold a beneficial long position in the shares of DOL, CPB or KHC either through stock ownership, options, or other derivatives. I do hold a beneficial long position in shares of AMZN, META, MSFT and DIS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
Where is the market rebound hiding?
Following the markets these days is enough to make anyone dizzy.
The constant news of disappointment between rising interest rates, inventory issues and high inflation is enough to shake all types of investors so if you find yourself wondering what is going on, or when will this end, know that you’re not alone.
It’s important that I first mention that I have full confidence in our positions regardless of market performance or what stage in life you find yourself today. This comment applies for clients who are retired, not retired and everything else in between. Remember, your portfolio has been customized to your needs and has been personalized. You did not force yourself into a box but rather the box was built around your needs and wants.
Is anything making money these days?
If you invested your entire portfolio into Campbell Soup Co. (CPB), Kraft Heinz Co. (KHC) and Dollarama (DOL), you could say your up on the year.
Everything else except real estate and oil is taking a beating these days, including mega tech companies. Tech giants who pretty much own most of their respective market share, are all down. Yes, I’m talking about Amazon (AMZN), Meta (META) and Microsoft (MFST).
Mickey Mouse and the family at Walt Disney (DIS) are also down.
Balanced investors who own balanced funds have also not been able to fight off these headwinds causing their investments to drop.
Global Supply Chains & Employment
Yes, ports in major cities are starting to relieve the bottleneck that built up over the last year and yes cheap access to money certainly made it easier for us to buy things however it seems we are starting to see relief within global supply chains.
This could be good, or it could be bad. Depends how you view the situation.
Perhaps people are buying less products due to the instability in prices and therefore demand is starting to peak.
Or
Supply chain platforms are simply catching up.
In my opinion, the second scenario is less likely simply because we are facing a job shortage. The people who want to work, want more money to work and the people who can afford to wait for what they want, are waiting.
What will be the catalyst to move the markets? What factor has the potential to ignite a market rally?
We need to see more quarterly earning reports to see if profits are rising so that wage inflation and supply chain constraints are less impactful.
Today, the job market is hot, and employers are forced to pay up on wages to maintain employees otherwise they risk disrupting future growth. Higher expenses plus higher borrowing costs as interest rise are both factors likely to negatively affect stocks UNLESS the business generates more revenues and can absorb wage growth and higher borrowing costs. In other words, if the companies we own sell more widgets at a higher price and the demand for these widgets stay the same, companies can grow causing future earnings or expectations of future earnings to spike. What we want to see is a year over year comparison where revenues, operating income and net revenues show a trending increase.
At that point, the average investor will start to look at the 40 – 80% stock price discounts as an attractive entry point to get back into the market. If that happens, the floodgates of capital may start to flow back into the capital markets. No one wants to miss the rebound plus this would be very good for stocks. Therefore, parking as much cash in your investment portfolio as possible is so important. Afterall, a rebound feels nice for everyone but even more so for investors who bought at or near the bottom. This is where an enormous amount of wealth can be created.
My advice
Today, I believe our best option is to sit on the cash and/or load up or make more cash available. Many of my clients are already positioned like this so no action on their part is required.
For others, today may be a good time to add to your accounts especially clients who are 10 years plus away from retiring. As I mentioned in one of my weekly blog posts, your purchasing power to buy growth stocks is 3 times more powerful than it was one year ago from today. This means you can buy 3 times the number of shares of a business than you could in early 2021.
Consider this
In 1997, the share price of Amazon was $18 when it went public. If you had invested $5,000 in that IPO and bought 277.77 shares that day, your investment would be worth nearly $11.4 million dollars today.
That was 25 years ago.
Many of my clients have been investing for more than 25 years and yet they have not turned a $5,000 investment into $11 million dollars. Clearly, buying the dip combined with a holding period of 25 years has not been the popular strategy.
In market environments like what we are experiencing today, loading up on cash with the anticipation of buying more shares of businesses we want to own for the next 25 years could be a passage towards happier days ahead.
Have a great weekend everyone!
Talk soon,
Michael
Disclaimer: Nothing on the website shall be construed as an offer to buy or a solicitation of an offer to buy any services or products. Commissions, trailing commissions, management fees and expenses may be associated with investments. Products are not guaranteed, their values change frequently and past performance may not be repeated. Mandeville Private Client Inc. is a member of the Investment Industry Regulatory Organization of Canada and a member of the Canadian Investor Protection Fund.
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. This publication is not an offer to sell or a solicitation of an offer to buy any securities. The information in this publication is intended for informational purposes only and is not intended to constitute investment, financial, legal, tax or accounting advice.
I do not hold a beneficial long position in the shares of DOL, CPB or KHC either through stock ownership, options, or other derivatives. I do hold a beneficial long position in shares of AMZN, META, MSFT and DIS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
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