Mona Lisa has never admitted whether she is smiling or frowning. I snuck in a visit when we were both in Amsterdam, but she kept that secret to herself. Maybe it was a good day – looking at her carefully I think she was happy to see me. Similarly, nine months of investment markets have been happy enough to move forward amid the troubled stream of world news. We’ll touch on this below, along with declining inflation, the importance of “basics”, a hint on how Mona Lisa manages anxiety, an innovative “banana index” to ponder before our next grocery trip, also a light-hearted new book with gems and insights on aging, by a friend Sharkie Zartman. Thank you for enjoying … and I always appreciate hearing back from you!
It’s easy to recall why Mona Lisa would have been concerned last year. Inflation near 10%. Interest-rates up by double, then doubled again. Housing values down 15% while rents soared. Groceries skyrocketed. FOX, BNN, and others hyped fears of possible 25-40% meltdown. But she avoided those concerns, held onto her seat, quaintly balanced her smile/frown, and gathered solid gains since last summer. Someone at The Economist coined this a Mona Lisa market – perhaps it’s a stealth rally – but aside from such names, the simple fact is that account values have grown quite substantially the past nine months.
Inflation continues falling. From 9.1% last June it’s now 4.3% and on track for 3% this summer. As interest and mortgage rates soften, the acute stress that touched many families over the past year will ease. Investment markets anticipated as I suggested last spring with a healthy 10% growth since mid-2022. Most clients “stayed in the boat” – trusting our plan and the flexibility of our fund managers to adapt profitably. Account values have grown well.
Questions come in since last-year’s bond market collapse – yes as healthy growth has already occurred this leads to the question, “What’s next? Is it too late?” Is it too late to invest or re-invest into equity-growth, dividends, real estate, infrastructure, and other strategic income? Absolutely not – it’s not too late. If someone missed the first six or nine months of a recovery, it’s significant but it was only the opening of a new 5-to-7 year bull market.
Now and always, stick with basics. They work. I’ve been sharing such basics in this letter since 1998, helping you confidently enjoy “A Lifetime of Wealth – and how not to lose it”. If you tend to follow the news as I do, take it as information or maybe entertainment but don’t use it for investment decisions. When news media report financial storms we’re already in the middle, and when news media say it’s sunny and safe the first leg or two of growth has already passed.
There was a client who called anxiously – season after season – about her retirement funds. I knew her well, even to the TV station she was fixed on every afternoon. I said to her, “What you own is not what they’re talking about, but hearing you worry I’m wondering, do you have a prescription for anxiety?” She hesitated, and I continued: “Actually I have a prescription and it’s guaranteed: avoid that TV station. You have a significant allergy or sensitivity to it, so avoid that station. Worries will pass, and your portfolio will do fine and keep paying income this year, next year, and for life.” You might wonder if she took the prescription? Yes, and our later calls changed completely … more about family and life, less about markets or news.
- Share this if someone you know is using the news for a shot of adrenaline or cortisol. That daily habit is negative for wealth and health … especially cardiovascular health, and for the income you need for living. Life is challenge enough without swallowing a steady dose of worst-possible news.
More on the question, “Is it too late?” Consider the following, and then we’ll move to more amusing thoughts:
- Bonds and some other assets dropped last year because interest-rates rose so quickly. Last month put the end to that. As interest rates ease in the seasons ahead, bonds and other high-yield assets will mostly grow, adding nicely to your portfolio income.
- When one sector has fallen it later becomes an escalator and may offer extra reward. Since last spring/summer, certain areas of growth-equity fit this description. Today we can say office properties are seeking the same cue. There is a pendulum, a principle that what falls will rise, what swings away will be back again. We use this to our benefit.
- Such strategies fit into the daily activity of our portfolio management teams. Each week and season they’re rebalancing our financials, real estate, infrastructure, industrials and everything else to ensure safety, growth, and long term income. Our growth teams choose undervalued assets with upward potential (diversified among sectors and countries), and then trade them for other similar assets who lagged and are stepping back on the escalator. Perhaps imagine holding $1 and riding up to $1.10, then taking another escalator to $1.20, and so on. Some of our teams are focused more on income, others on growth: overall we gain stable or rising income and healthy growth as years proceed.
- That’s how, for my money and yours, we benefit from these processes, strategies, and portfolio teams, so we can enjoy safe income and healthy growth for the years to come.
When is the best time to invest? No one in the world can consistently forecast interest rates, inflation, corporate earnings, markets, etc. So as I shared above, we stick to basics. These basics work consistently so your money keeps working for you. There’s never a time we bow out of dividends, or real estate and other hard assets that pay income, or growth equity entirely. We stay invested in the basic principles that continue to guard and sustain your wealth. Nick Murray was the one who famously remarked, “The time to invest is when you have money.”
Some anonymous genius at The Economist crafted the “Banana Index” to classify different foods by their weight, protein, calories, and impact on the environment. I suspect it’s still a work in progress and I know for a fact they welcome comments to refine it. One kg of ground beef equals the emissions or carbon footprint of 109 bananas, and a single calorie of beef equals 54 times the emission of a calorie of banana. No surprise, there’s a continuum from vegetable and nuts/legumes, then to rice and fish etc., and on to pork (11 on the index) to the sizzling scoundrel we may be lifting off a BBQ.
As a practical thought there are different ways to apply the insights of this index. I almost always use beef (or chicken) when making chile but I also add oatmeal and corn to enhance protein while reducing our measure on the banana index. Less beef = less carbon footprint, healthier environment, happier chili. (Earlier attempts with TVP / soy protein disappointingly burned to the pot.) Dicing some super-health kale, spinach, or zucchini into the chili has been a definite win – you could try this.
How to enjoy healthier years and a happier world is the subject of Sharkie Zartman’s new book coming soon, “Shark Sense: a simple yet powerful approach to reach your goals”. Don’t tune out at the word goals; too many discard their goals with aging or retirement, or expect there’s little new to enjoy with rising years. Not so! Sharkie is 71, her husband near 80, and since the age of 50 or so Sharkie has been heralding new frontiers of the years ahead. Pages 126, 127 illuminate ten top perks of aging: I’m not divulging them here, that would be unfair, but she’d love for us to talk about them so let’s do so. Brilliant illustrations too by Damian Fulton. This is an easy read, light and invigorating. Some of her earlier books on Amazon include: Win at Aging, and Empowered Aging. This is us NOW or fairly soon it will be. It certainly relates to where we’re going, and for many of the people dear to us. I happily recommend Shark Sense for yourself and to share.
Yours always in Financial Security for LIFE.
Brian Weatherdon, MA, CFP, CLU. 905-637-3500
627 Guelph Line, Burlington, Ont. L7R 3M7. 1-877-937-3500
Certified Financial Planner, Certified Retirement Coach
Author: A Lifetime Of Wealth — And How Not To Lose It (2013). Protecting Life, Loved Ones, and Future Dreams (2013). Your Business, Your Retirement: Halton Retirement Study (2015).
** This monthly letter touches on key strategies in Canadian and global investing and financial planning. This letter is not an offer to sell any kind of security, insurance, or program. Historical returns and risk measures are not a valid guide to future performance. Returns are from publicly available sources and research from a variety of firms including but not limited to Canada Life, CIBC, Dynamic, Mackenzie Financial, RBC / PH&N, and more. Opinions in this letter belong solely to the author and no other body is responsible for the content expressed here. We value opportunity to coordinate with your legal and accounting advisers to further your financial goals in home and business. We are grateful always to receive your comments and questions.