2022
Podcast: Inflation, interest rate hikes and war: what does it mean for your portfolio?
Throughout history, we tend to have longer periods of moderate normalcy in the markets.
That hasn't been the case so far in the 2020s.
Not even one quarter through the 2022 calendar year and we've already seen inflation hit its highest level in 40 years, we've seen an interest rate hike, and we've seen one of the largest countries in the world ruthlessly invade a neighbouring country.
With all of this happening in such a short burst of time, what does it all mean for your investments?
To make sense of the chaos, we're joined by Alfred Lam, Senior VP and Chief Investment Officer at CI Global Asset Management.
Alfred and his team oversee over $40 billion worth of investments among Assante clients. I consider him a good friend, and a trusted source of information pertaining to investments and the markets.
You can listen to the podcast on these platforms.
This episode is a bit longer than our normal podcast, so here are a few timestamps from some of the key highlights.
- The problem with Zoom and Moderna (5:30)
- Thoughts on interest rate hikes moving forward (10:30)
- Thoughts on the effect of the war on the markets (12:00)
- The problem with sanctions (14:00)
- Why markets want to go up (18:30)
- The main reason why a recession likely won’t happen this year (24:00)
- How we’ve reacted to current events in our portfolios (35:45)
You can also check out some highlights from the episode below.
Why Zoom and Moderna weren’t great investments
Valuations aside, Zoom and Moderna were arguably two of the most important publicly traded companies that operated through the pandemic.
Zoom became the integral way in which we chose to communicate. Moderna developed a vaccine that’s inoculated tens of millions of people around the world.
Despite their noticeable presence throughout COVID, they weren’t necessarily good investments.
Alfred touched on this recently during his latest Portfolio Construction column, and he brought it up again on the podcast.
“Good companies aren’t always good investments, because they’re too expensive.”
Zoom traded at a peak of $568 USD in October of 2020. As of writing, it’s trading at $111.
Moderna hit a peak of $384 in September of 2021. It was trading at $167 on March 17th, 2022.
Alfred discusses these two stocks and the influence of day traders on their valuations in the clip below.
The problem with sanctions
As soon as Russia invaded Ukraine, many expected politicians around the globe to react.
Most countries reacted to Russia’s invasion in the form of sanctions.
From a geopolitical standpoint, cutting all ties from Russia makes sense. However, sanctioning one of the most resource-rich countries in the world does cause other issues, which Alfred touches on here.
Why markets want to go up
When we talked to Drummond Brodeur (Senior VP and Global Strategiest, CI Global Asset Management) back in December, he was relatively bullish on the markets heading into 2022, although he did say it would be volatile.
Obviously circumstances early in 2022 have negatively affected the markets.
However, Alfred makes a few points in the clip below as to why the markets should be on the upward swing moving forward.
He does make one notable caveat.
“As long as you don’t have bad news…markets want to go up.”
The main reason why a recession likely won’t happen this year
Two consecutive months of negative returns in the markets, coupled with rising interest rates, have led some to comment on the possibility of a recession in 2022.
Alfred believes that’s unlikely, at least for this calendar year. He talks about the main reason why in the clip below.
However, much like death and taxes, recessions are inevitable. So, when does Alfred foresee one happening?
“I do think that eventually, probably we will hit a recession when interest rates hit 2%,” Alfred said later in the podcast.
How we’ve reacted in our portfolios
You’ll want to check out some of Alfred’s other comments from the podcast for more context on the process behind his team’s decision making within our portfolios.
But, for a quick recap of some changes we’ve made, check out his comments from this clip here.
And, here are some closing comments from me on buying opportunities, the power of dollar-cost averaging and understanding the purpose of your dollars before we invest.
So, if you have any questions for Alfred, myself, or the state of your portfolios, please don’t hesitate to reach out.
Until next time,
Assante Sana
John Lawson (CFP®, CIM®, FEA)
Senior Wealth Advisor, Assante Capital Management Ltd.
