Page and Associates Ltd.

Family Wealth Management

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Recoveries Beat Bear Markets

Empire Life’s blog post of June 22 provided an interesting analysis of past periods of market contractions over 20%, and subsequent recoveries. One notable chart shown here:

The chart makes it clear that expansion phases usually last longer than contractions, and have a larger impact. The article compares this period with the 1970-1985 period of peak inflation and interests rates, noting similar depth and duration of corrections about -23% over 6 months, and recoveries of 55-70% over the following 18 months. Those recovery phases produce returns well above the market average.

Will investors see an environment of low inflation and interest rates similar to the past two decades or something closer to the inflationary environment five decades ago? Perhaps the answer is “somewhere in the middle”. But, here are a few things to remember:


• In either case and as history has shown, staying invested has proven to be a beneficial strategy for the long-term investor.
• Adding to your investments, particularly after large market contractions will likely help expedite your portfolio’s recovery.


Full Article: https://blog.empirelife.ca/blog/corrections-what-we-can-learn-from-the-past

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Patience will be Rewarded, Active Managers Still Beating the Benchmark

The below chart highlights the returns from May 1st, 2007 until yesterday’s close – a period of roughly 15 Years. This includes the Global Financial Crisis, the COVID-19 Pandemic, and countless corrections/world events in between.

We’ve shown the returns of 3 of Fidelity’s flagship equity strategies against the S&P 500 and TSX over that time period. Their returns against the indices have been staggering and serve as a reminder that not all active managers are created equal. We believe that Portfolio Managers Mark Schmehl and Dan Dupont have proven themselves as the “elite of the elite”, which is why they have been on our preferred managers list for some years already.

Volatility is part of investing; perhaps some investors have forgotten that over the past 3 years. Rather than trying to figure out when/how it will end — use downturns as an opportunity to add/diversify for clients with the appropriate time horizon and stick to your investing principles. Patience is the ultimate path to success.

15 Years of Returns: Fidelity Special Situations, Canadian Growth Company, and Canadian Large Cap

Source: Fidelity Investments Canada ULC

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Edgepoint Commentary

Portfolio managers believe investors should be excited that the market is on sale – why doesn’t the media position it this way? Investors who have a medium time horizon will likely look back on this period as a buying opportunity. “Many investors will see declines in fixed income portfolios and allow their fear of loss to force them to sell their holdings. We want to buy from them.”

Read more:
https://www.edgepointwealth.com/article/earning-our-wings-1st-quarter-2022/

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Peak Inflation? Annual Rate still high, but monthly rate declines in April.

The US Bureau of Labor Statistics today released Consumer Price Index (CPI) data for the month of April, showing seasonally-adjusted price increase of only 0.3% from March levels. This reaffirms the view of some commentators that inflation should naturally slow from recent record year-over-year rebounds from pandemic-induced price decreases in 2020.

The graph below shows the month-over-month price level change, which has hovered between 0 and 0.5% per month for the past 5-10 years. You can see the negative inflation in 2020 March – May, which took CPI down 1.2% during that period, limiting total annual inflation to only 1.2% for the year. 2021 made up for that as demand for goods surged amid pandemic restrictions on services, and covid-induced supply chain disruption, with a 7% total inflation for the year. Those supply chain disruptions continue into 2022: first quarter 2022 inflation has been just shy of 3%, with 1.2% of that in March alone, with the conflict in Ukraine spiking oil and energy costs, which are feeding through to the price of all goods and services that use them.

(Source: Bureau of Labor Statistics https://www.bls.gov/cpi/latest-numbers.htm )

Some goods prices have started to decline as their supplies become more balanced, used car prices being one example. Historically, oil prices have not stayed much over $100 per barrel for long, and even if they stay at that level, at least they would not contribute directly to further inflation in coming periods. For this reason, some analysts believe we have seen the peak in monthly inflation at 8.5% in March, and that the year-over-year figure, down to 8.3% in April, will continue to moderate as the year continues. This may take some pressure off central banks on the need for interest rate increases.