Investment industry analysts and experts are debating whether a recession will occur in 2023.
Last year was an emotional rollercoaster for stock and bond investors as both markets experienced significant volatility and negative returns. Russia’s Ukraine invasion, rising inflation, and recession fears dominated daily headlines.
Since October 13th global stock markets have rallied 11% on lower-than-expected September U.S. inflation numbers and expectations that central banks will slow the speed of future interest rate increases.
Last week, the U.S. Federal Reserve raised its overnight lending rate by 0.75% and signalled further rate hikes given the recent inflation rate of 8.3%. As a result, stock markets sold off back to their summer lows.
Debt is relatively common in life. In 2019, 73.2% of Canadians had outstanding debt or used a payday loan. And if you feel like your debt is too high, you're not alone — 31% of Canadians believed they had too much debt.
"Worst 6 months in the US markets in 30 years" / "First time in decades both equity and bond markets are selling off"
A challenging year for investment markets sums up the first six months of 2022. Several economic roadblocks have reversed both the positive sentiment and positive trend equity markets experienced in 2021. That said, within every episode of stock market turbulence lies a bedrock of opportunity.
The investment markets currently find themselves in a dog fight between two enemy aircrafts: inflation and rising interest rates. If one were to look beyond the horizon of stock market performance this year and focus on the pilot’s economic indicator instruments inside the cockpit, it would reveal a stark contrast.
Like in the 1980s hit movie trilogy Back to the Future, investors have a huge sense of déjà vu. Inflation in Canada and the U.S. is back to 40-year highs, and as a result, central banks are quickly increasing interest rates as they worry about inflation getting entrenched. Central bankers wish they could jump into Doc’s DeLorean time machine and go back to early 2021 to slowly start raising rates rather than now being behind the curve. Meanwhile, governments wish they could use the DeLorean to go back and give out less money than they did during COVID.
Before you start planning a new vacation or purchasing a new toy with this year’s tax refund, it’s wise to consider investing it, with the world markets down year to date. When markets are down, it’s a great time to maximize your refund and set yourself up for the future by averaging into your investments. We recommend you consider three alternative options to utilize your tax refund before planning that trip to Mexico.
During 2020 and 2021, technology companies benefited greatly from the COVID lockdowns as more people stayed or worked from home. Consumption of anything digital went through the roof, with technology companies reporting blockbuster earnings and surging stock prices. However, 2022 is a new environment.
There are several uncertainties on the investment horizon. These concerns are building a significant wall of worry for investors, leaving them wondering whether these factors will be strong enough to cause a recession. More importantly, investors are left pondering what they should be doing within their portfolios. Let’s start by addressing the concerns to help investors filter the noise and focus on what matters.
Investment markets have been volatile in the first quarter of 2022. Rising interest rates, rising inflation and the Russia-Ukraine geopolitical uncertainty have been weighing on markets.
Why does Matco believe that Vietnam is Asia’s next rising dragon?
Vietnam today has many similar features to China 20 years ago. Namely, the young educated population, strong work ethic, growing middle class, lower labour costs, substantial foreign direct investment, and a pro-growth government.
The name Molotov Cocktail was coined by the Finns in 1939 during the Winter War when Russian aircraft bombed Finland. Soviet foreign minister Vyacheslav Molotov would announce on Soviet radio that those bombing missions were humanitarian food deliveries for their starving neighbours. The Finns developed the handheld firebombs and threw them at Russian tanks as they rolled down the street. The Finns called it the Molotov Cocktail to go with the “food parcels” being delivered.
As the world watches the Russian invasion of Ukraine, investors have been hitting the panic button. Major global stock markets year-to-date are down in the range of 8-14%, while the TSX Composite Index is only down 1% given its large weight towards the resource (energy/metals) sectors.
The investment landscape constantly evolves, like navigating your way through a golf course. In the investment world, global central banks design the course, and it’s up to us as investment managers to understand how the course is laid out and manage our shots accordingly.
Risk and reward are woven through many decisions we make on a daily basis. If you are running late to a business meeting are you willing to speed to get there on time? The risk is increasing your speed which increases the risk of an accident, but the reward is arriving on time. Risk and reward are similarly approached in the investment world, there are different investments that habitually have different risk profiles. Depending on personal circumstances, short and long-term goals, and other factors the risk of your portfolio should be suitable.
Starting to invest may seem like a daunting task - there are many options on how you can approach it. Once you have identified that you personally have the ability to invest there are a couple of main avenues you can explore based on several factors such as: size of account, fee preference, and advice needed.
The Canadian stock market continues to be seen as an unappreciated underdog due to its lack of sector diversification and heavy reliance on the resource sector. For many global investors, last year's 25% return came as a surprise. However, it wasn’t a surprise to Matco clients as we discussed at our 2021 Outlook how we believed that Canadian stocks would do well.
Investment markets performed very well through 2021. The fourth quarter was no exception, with the Canadian equity market up approximately 6% and the U.S. equity market up approximately 11%. North American bond markets however paled in comparison, as interest rates moved higher putting downward pressure on bond prices.
Here’s how to become a successful investor.
The opportunity to invest in the 21st Century world is everywhere – Instagram posts about making millions on investment option strategies, or TV commercials about opening a stock trading account – where does an individual start?
Make your money work for you.
Let’s take a look at the average working individual. Most days are filled with day-to-day work, meetings, personal and professional planning, and other opportunistic events to advance one’s career. During these days, a call from your investment professional may get lost in the noise of day-to-day work tasks.
Matco clients are aware that our proprietary M-Factor process leads us to own companies that are compounders of capital over time, have a strong balance sheet, usually pay a dividend and most importantly are reasonably priced relative to expected earnings growth.
A financial plan is a great living document that we use at Matco to help guide our clients through their life cycles, and ultimately, give them peace of mind for their retirement. Another great option is walking through the retirement calculator on www.Matcofinancialinc.com.
It is easier to invest today than at any other time in history. From radio commercials about investing in Bitcoin to social media ads of opening a stock trading account in minutes – access to the investment industry is right at our fingertips. However, we must take a step back and understand whether or not now is the right time to invest.
Successful investing takes time and patience, it is not a get rich quick situation. Investing should be considered throughout different life cycles, the way you invest in your 30’s should be different than in your 60’s. Understand that with life’s changes, your investment portfolio should develop and grow to accommodate changing financial goals and circumstances.
Q3 2021 Review & Outlook with the Matco Investment Team
There is a Chinese proverb that states “the best time to plant a tree was 20 years ago. The second-best time is now”. The same is true for tax and financial planning, the best time to plan was in the past – but it is never too late to structure yourself correctly to keep as much of your income in your pocket rather than sending it to the Canadian government.
Investment markets have performed well through the first three quarters of 2021. However, September observed increased volatility and a modest downtrend for equity markets. Signs of decelerating economic growth, worries of persistent inflation, COVID-19 delta variant concerns and the possibility of tightening financial conditions are weighing on the minds of market participants. Nevertheless, the economy continues to grow, and opportunities remain.
The U.S. Federal Reserve sets interest rate policy for the largest economy in the world. Whether the U.S. central bank is tightening financial conditions (increasing interest rates or reducing asset purchases) or easing financial conditions (lowering interest rates or increasing asset purchases), is therefore closely monitored by economists and investment managers around the world...
With the majority of second-quarter earnings reported in Canada, here’s a quick summary and highlights for the Matco Canadian Funds:
Matco Small Cap Fund and Matco Canadian Equity Income Fund.
What’s said at Jackson Hole matters to global stock and currency markets. Central bankers and financial heavyweights meet annually at this exclusive economic symposium to discuss challenges, implications and policy that can affect us all.
Sustainable investment assets (excluding fund of funds) hit CAD$26 billion in Canada. This represents a quarter-over-quarter growth rate of 22% and a year-over-year growth rate of 130%. In the U.S., 2020 saw sustainable investment funds grow by USD$51.1 billion. More and more money continues to flow into ESG investment vehicles and the money being invested is outperforming investment vehicles that have not incorporated some form of ESG investment factors.
Q2 2021 Review & Outlook with the Matco Investment Team
There are many theories about how the terms bull market and bear market came to be, but the most popular explanation is how each animal attacks. A bull attacks by lowering its head and using its horns to lift “up” its opponents, while a bear attacks by raising its front legs and using its paws to swipe “down” at its opponents. Thus, when the market is trending “up,” it’s termed a bull market and when the market is trending “down,” it’s termed a bear market; a bear market is confirmed when a market declines by 20% or more.
The first two quarters of 2021 have been very positive for investment markets around the world. Economic data continues to surprise on the upside.
Since late November, we have been positive on small cap stocks as an economic recovery play. Eight months later, this investment thesis has continued to pay off for long term investors. Year-to-date, small cap stocks globally have significantly outperformed their large cap peers.
The first quarter earnings session of 2021 is behind us and all three Matco equity funds have performed admirably to kick off the year. In the context of the broad market within Canadian equities, over the past few quarters, we have gradually seen companies start to ease the fears of those concerned with potential asset bubbles and lofty valuations by producing strong and growing earnings metrics.
Back in November of 2020, we published a Matco Insights piece titled “The Inflation Debate and What it Means for Your Portfolio”. Within that publication, we primarily focused on the relationship between inflation and the labor market, as well as inflation and government spending. The conclusion was ultimately that inflation is more likely to be a persistent concern when the following two conditions are met: government debt is at lower levels and unemployment rates are much lower.
Throughout the Covid 19 pandemic, household debt has continued to rise throughout Canada. Canada has been the poster child for a high household income to debt ratio for years, with many economists focusing on the long-term effect of low interest rates.
Q1 2021 Review & Outlook with the Matco Investment Team
In the early stages of digesting Canada’s first Federal Budget in more than two years, we wanted to provide a flash update with the primary highlights. Canada’s 2021 Federal Budget outlines CAD$101 billion in new government spending over a three-year period to fuel the economic recovery while continuing to bridge the growth gap due to the COVID-19 pandemic.
The preferred share segment of the market has often attracted individual investors seeking yield. In recent years, this demand has been further reinforced by a low-interest rate environment, which has created challenges for investors looking to generate income within their portfolio.
The large stimulus packages announced by G7 governments to support the economy during COVID-19 have led to massive deficits and debts for all nations.
What a difference a year can make. The month of March marks the one-year anniversary since the COVID-19 pandemic infiltrated our world, causing a global economic lockdown.
Just in time to raise your taxes!
When it comes to making an investment, there are several factors that will influence whether the outcome is successful. One of those factors, which is built directly into our investment process at Matco, is value.
Working from home has become a regular occurrence through 2020 and the COVID-19 pandemic. Adoption of the home office has been a difficult transition for some companies and seamless for others.
Millions of Reddit-users under the subreddit known as r/wallstreetbets coordinated one of the most epic short squeezes of all time.
Over the last year we have seen more Black Swan events than I have witnessed for many years. With the American Capital under siege, a pickup in Covid-19 cases, more shutdowns and a new US President introducing a new agenda we are all asking, “Now What”?
Matco is here to help you navigate the registered investment world with details about your contribution limits and deadlines.
In years to come, when people look back on 2020 it will be remembered as one of the most challenging years in the modern era.
Since the 2015 Paris Climate Agreement, governments and large institutional shareholders have been putting a massive amount of pressure on Big Oil to do more to reduce greenhouse emissions.
On the shareholder front, many of the largest pension, endowment, and sovereign wealth funds have decided to reduce or eliminate the energy sector from their portfolios since Big Oil was not moving fast enough.
Q&A with Anil Tahiliani, Vice President & Portfolio Manager, Matco Small Cap Fund
With many global stock markets hitting all-time highs, investors feel optimistic despite the negative news of rising daily COVID-19 cases. To better understand what is happening, we need to look below the surface to see how professional investors position their portfolios.
Working from home has become a regular occurrence through 2020 and the COVID-19 pandemic. Adoption of the home office has been a difficult transition for some companies and seamless for others. Working from home has reached a point for some companies with productivity at highs and more of a focus on work-life balance, that the prospect of moving back to a full-time office may never happen.
The current U.S. election was one for the ages, with record voter turnout and an extended vote count period due to the increased number of mail-in ballots. Although it appears that Joe Biden will become the 46th President of the United States come January of 2021, some uncertainty remains.
In this webcast Matco's investment team shares their thoughts on the U.S. election results and their investment implications.
The team is joined by special guest Doug Peta, who is the U.S. Investment Strategist at BCA Research Inc.
There has always been a lot of debate as to whether ballooning government deficits will lead to significant levels of inflation. This debate also leaves investors wondering if they should be protecting their portfolio from the possibility of inflation.
I have been fielding an increasing number of questions regarding becoming a Canadian Non-Resident. There are various reasons why Canadians consider moving to another country, including lower taxes, employment opportunities, retirement lifestyle, or maybe all of the above.
Q3 2020 Review & Outlook with the Matco Investment Team
2020 has been an interesting year to say the least. A global pandemic, the fastest bear market in history, and increasing unemployment or salary cuts. If you are thinking about topping up your RRSP this year but do not have access to liquid funds other than your TFSA, there may be a strategy that can work in your favour.
In my last blog I showed that Mr. Trump is not the stock market president, in that the U.S. stock market has had better returns under various presidents during their term and that since 1948, the U.S. stock market has done better under a Democratic president than a Republican.
It is hard to imagine that we are now three quarters of the way through 2020. In one breath, it feels like just yesterday that society and the global economy were being forced into lockdown. At the same time, it seems as though a decade’s worth of developments have come to pass this year.
President Trump has often bragged about how well the stock market has performed since he was elected. With the U.S. stock market recovering all its losses since its March lows and recently hitting a new all-time high, it’s time to do some fact checking
Recently there have been media reports of a few companies that had purchased pandemic insurance. Two notable examples are the Wimbledon Championship Tennis Tournament and the Shaw Festival in Niagara-on-the-Lake.
Consuming cannabis is the new normal. In 2013, Uruguay was the first country to legalize recreational cannabis. In 2018, Canada was the first industrialized country to legalize recreational cannabis. Today, there are over fifty countries that have legalized medical and/or recreational cannabis.
The International Monetary Fund (IMF) recently posted a blog about corruption and COVID-19.
Take advantage of income splitting and pay less tax by using a spousal loan
In the current economic environment, buying GICs can feel like making a deal with the devil. With interest rates at lows, with little to no projection to increase in the near term, what is the real price you pay to guarantee and lock in your return?
Pink Floyd’s classic song ‘Comfortably Numb’ sums up the current state of global markets and the economy. Central bankers (‘the doctors’) have successfully revived the global economy (‘the patient’) from the COVID crisis through massive injections of liquidity
The old investing adage “a bird in the hand is worth two in the bush” signifies the importance that dividends and return of capital play in a sound investment strategy.
The first half of 2020 has been a rollercoaster on several fronts. At the beginning of the year, the COVID-19 virus was widely viewed as a minor medical and sociological threat. However, on March 11th it was declared a global pandemic by the World Health Organization which led to a halting of the global economy, outside of essential services.
Within our Matco investment process, there are two primary layers of investment management. The first layer is security or stock selection, which is similar to choosing the ingredients for a recipe.
During their working years, many people become accustomed to a consistent pay cheque being available in their personal bank accounts on a bi-weekly basis.
COVID-19 has certainly changed the way we work and live. One of the most positive outcomes is improved productivity. Evidence can be found all over social media as friends and family share posts of de-cluttered spaces, learn a new language and grow the ever-elusive sour dough yeast.
Q&A with Matco Investment Team regarding our Top Ten Investment Themes for 2020
Have you ever hit the road heading to a place you have never been without a map? Or arrived at the airport with no idea of your destination? Setting goals and building strategies to reach them are elements of successful behavior.
Like the Netflix hit series ‘Stranger Things’, the global COVID crisis has turned the lives of billions of people upside down for the last three months.
The world of bonds, the boring capital market security that has failed over the years to provide the same dramatic appeal and excitement as the stock market.
Since March 22nd, global stock markets have had a powerful rally with Canadian and U.S. stock markets, up 36% and 34%, respectively as of April 29th.
Q&A with Baron Lee, Portfolio Manager of the Matco Cannabis Fund
Q&A with Trevor Galon, Chief Investment Officer – answers the top questions that clients are asking now
Host: Anil Tahiliani, Vice President & Portfolio Manager
Given the stalling of the global economy in order to stop the spread of COVID-19, central banks and governments are forced into a corner to do “whatever it takes” to dampen the impact of a recession.
Despite a severe market correction brought on by fears of a global pandemic around the coronavirus, or COVID-19, Anil Tahiliani, a portfolio manager and vice-president at Calgary-based Matco Financial Inc., is hanging in with his portfolio selections and has in fact added to some existing holdings on price weakness.
On the weekend, Saudi Arabia cut its official crude selling prices for April, effectively launching an oil price war against Russia. The price cut was a result of Russia and Saudi Arabia failing to agree on terms surrounding further production restrictions that were slated to begin April 1st.
Since February 21st, investors have been gripped by the fear of the Coronavirus spreading globally and causing the next recession. Unfortunately, given the digital age we live in, fear, bad news and fake news all spread faster than good news.
News that the Coronavirus (Covid-19) is spreading outside of China, has caused investors to hit the panic sell button. With Covid-19 not yet contained, the economic damage continues to spread from China and across multi-national companies in the airline, hotel, cruise, casino, entertainment and logistics sectors.
This morning one of the Fund’s top ten holdings (with a 3.7% portfolio weight) – Northview Apartment REIT announced a takeover proposal at a 12% premium to yesterday’s closing price. The all cash deal is expected to close in the third quarter.
As of Feb. 4th, Tesla’s stock year to date has gained 112% in less than 24 trading days. Is this parabolic move based on fundamentals or just irrational exuberance? We looked under the hood to check out the facts.
The year that was 2019, from a global capital markets perspective, could be characterized as one dominated by geo-political headlines. The U.S.-China trade war, Brexit uncertainty, the Canadian Federal Election and active central banks are among the list of major events that carried us through the calendar year.
In past years, investors often enjoyed a relatively quiet summer with less frequent economic and political headlines. Those times appear to be a thing of the past, as the laundry list of developments continues to grow as we progress through 2019.
The first half of 2019 has been positive from a capital markets perspective, especially when considering the broader political and economic context. The global economy continues to grapple with several geo-political and trade related challenges, while the U.S. economy progresses closer to the end of a secular expansionary cycle.
The transition from calendar 2018 to 2019, from a capital markets perspective, has been an eventful one. The theme of heightened market volatility experienced over the last eighteen months remained prevalent as the baton was passed from one year to the next.
In this edition of Matco Insights, we take a closer look at the upcoming Saudi Aramco IPO while exploring some worthwhile market implications and considerations. More specifically, how could this potentially historic milestone within the energy sector impact the markets and your portfolio.