One Month In


With the first month of 2022 almost in the books, stock markets are on track for one of their worst starts in recent memory. As investors worry about interest rate policy, slowing economic growth, and rising geopolitical tensions, this rocky start stands in stark contrast to the broad positive trend of the last two years - stoking investor unease at what to expect next.

While no investor likes to endure these periods of downside volatility, it can be easy to forget that they are a normal feature of the stock markets that will happen from time to time. While outcomes vary from market to market, and do not occur on a set schedule, history shows that most major indices experience a 10% correction once every two years, a bear market (a 20% correction) once every 7 years, and a market crash (a 30% correction) once every 12 years - even more frequently for growth-orientated indexes.

With the Nasdaq now in correction territory for the year, the S&P 500 and Dow Jones not far behind, and others likely to follow, it can be natural for investors to wonder how long this will last, or whether to expect further drops. In terms of how long, the truth is nobody can be sure as forecasting short-term market movements can be akin to guesswork. As for further declines, with history as our guide, there is a higher probability that this is simply a regular correction as opposed to something worse. With this in mind, these periods remind us of a few key truths that we believe are worth revisiting. First, this latest bout of volatility won't last forever. As the chart below illustrates, no matter the bumps in the road, the longer-term market trend has been positive and benefited those that stayed the course.

This dovetails to the second truth, time in the market trumps trying to time the market. Stock markets have increased around 70% of the years following the end of WWII and yet many investors try to guess the 30% of the time that markets might decline - more often than not unsuccessfully. More importantly, as market declines can often turn around just as quickly as they start, missing these turns can be costly. Knowing these truths leads us to our final point - building well-diversified portfolios that reflect individual risk tolerances is key in helping investors remain hands-off. As it relates to stocks, this means buying high-quality businesses that will endure no matter the economic cycle and succeed over the long term.

In short, these truths lead us to the conclusion of many of history's great investors - in most cases, the best thing investors can do during these rough patches is to stay the course. While 2022 may be setting up as a year of increased uncertainty and volatility, our team remains focused on the longer term outlook and the positive trend that history supports as the likely outcome.

Top up your RRSPs. Maximize your savings.

Once again, we are fast approaching the RRSP season deadline. March 1, 2022 is the deadline for contributing to an RRSP for the 2021 tax year. The 2021 RRSP contribution limit is $27,830. For reference, your current allowable contribution limit can be found on your latest notice of assessment from the Canada Revenue Agency. This is a great opportunity for us to review your retirement investment strategy. Together, we can:

  • Calculate your contribution limit. The annual contribution limit is 18% of your earned income in the prior year, to a maximum of $27,830 for 2021. If you did not use your previous RRSP contribution limit, you can carry forward any unused amounts to next year. Note that employer and employee contributions to a registered pension plan will reduce your contribution room.
  • Decide how much to contribute and how to set up regular, automatic payments to an RRSP if you haven’t already done so.
  • Contribute to other tax-efficient plans such as a Tax-Free Savings Account (TFSA) or Registered Education Savings Plan (RESP). The contribution limit for TFSAs is $6,000.
  • Consider whether a US dollar registered account would benefit your circumstances. All registered plans are now available in USD with the exception of RESP accounts.

To make a tax deductible contribution, the contribution must be made within 60 days after December 31. Contributions to be deducted against 2020 income must be made by March 1, 2022. Click here to download our RRSP Reference Guide.

A unique set of challenges & resources for kids aged 13-19

Parenting takes a village – a fact that couldn’t be more true today. We hope you and your family are keeping well and coping with the daily challenges during this period of social isolation. We are mindful, though, that some children may be having difficulty, particularly those in their teenage years. It’s said that teens are the most misunderstood people on earth – they’re treated like children but expected to act like adults! Living, studying, working and interacting together under one roof may be exacerbating some of the challenges for teens.

And then there’s the lack of social interaction with friends. Heavily reliant on, and influenced by their peer network, teens in particular may be finding the lockdown challenging. Certainly, most teens are well-served in terms of tech devices and manage to connect with friends via social media, but this may have limits over an extended period as an alternative to real human connection.

There are numerous national resources available covering youth mental health. Should you need some support, here are some options:

While our primary mandate is to support your family’s wealth-planning needs, we regard this as a holistic undertaking – one that sees your financial health as part of the broader picture of your family’s overall well-being. Should you have any questions or details you would like to discuss, please reach out to us.