2023 New Year Report

Happy New Year! 

New Year’s is a time of reflection over the past year and a look forward to 2023. In this email, I’d like to reflect on 2022 to fully understand what has happened, its impact, and what, if anything could we have done differently.

On December 31st, Richardson Wealth moved their back office to Fidelity Clearing, a global leader in financial markets technology. This transition offers more efficient solutions for our operations and facilitates a better client experience. There will be some changes communicated in the next couple of weeks, however none of which are significant. 

When you are writing a cheque for deposit to your account, please use the payees as listed below:

• Canadian cheques payable to Richardson Wealth Limited or Richardson Wealth. 3rd party cheque deposits will be handled on an exception basis.
• U.S. cheques payable to Fidelity Clearing Canada ULC. We will not be accepting any 3rd party cheques in U.S. dollars.

For online deposits, you will have a new account number and will need to use a new payee. Our payee for online deposits is Fidelity Clearing Canada ULC. Please enter your new account number with no hyphens or spaces, using uppercase letters. You will receive your new account numbers in a letter the week of January 9th. You can access your new account numbers today on your client online portal or give us a call.

As we begin 2023, you will be able to make the following maximum contributions to your TFSAs and RRSPs. 

• RRSPs — $29,210 for 2022, $30,780 for 2023 OR 18% of your gross earned income
• TFSAs — $6,500 

Below I have provided a Market Review for 2022 with my thoughts which I hope you find both interesting and informative. If you have any questions, please don’t hesitate to reach out to us. 

As you are aware, we use purchasing power to reflect overall risk and our purchasing power is set between 0% and 30%. As we entered 2022, we increased our purchasing power significantly – increasing it to between 20% to 30% from 0%, based on individual objectives. During 2022 we were able to take advantage of opportunities, reducing our purchasing power to between 5% to 10%.

Jason and I appreciate the trust you’ve placed in us which we will continue to earn every day and look forward to the opportunities of 2023. If there is anything we can do for you or if you have any questions, we are always available to help in anyway we can. 

Market review

2022 was one of the most challenging financial markets I have experienced in my career which is significant since I have experienced Black Monday in 1987, rapid rising interest rates in 1994, the Dot.com bubble 2000-2002 and the mortgage crisis in 2008. As the economy came off the pandemic shutdown and restart, we have seen interest rates rising faster than ever before, causing significant volatility and unpredictability for the markets. 

The big news of 2022 was the return of inflation. Inflation was moving up slowly through the end of 2021, but the Russian invasion of the Ukraine caused a boost to prices causing inflation to rise to a problematic level. Just like an air bubble moving through a rubber hose, this inflation bubble needs to move through the economy without leading to 1970’s cyclical inflation.

To fight rising inflation, the Bank of Canada and the Federal Reserve have increased interest rates at a dramatic rate which is designed to slow the economy, reduce demand and lower employee wage expectations. Slowing the economy, even causing a recession, will reduce inflationary pressure and allow our economic world to reset. 

I like to think about the 2022 economy as a computer that is not working properly. When a computer acts in an unpredictable manner, it is recommended that you reboot your computer by shutting it down and allowing it to restart in the proper sequence. The Bank of Canada and the Fed are in the process of shutting down and rebooting the economy and we should start to see the reboot begin by mid 2023.

I am focused on month-to-month inflation numbers verse year-over-year inflation numbers. If month over month inflation averages 0.3% or less over a 3-month period, I expect annual inflation to drop below 4% by April. Month over month core inflation for November 2022 was 0.2%.

What do we do next? The answer is to continue to follow our investment strategy. Our portfolio models have done their job by preserving your capital during 2022, and with the purchasing power we still have, we will continue to take advantage of opportunities this year.

2022 has been a challenge on the employment side for all businesses and The Smith Group has shared in that experience. I have high expectations of performance when it comes to taking care of our clients, so we have worked diligently to identify, hire and train the right people to join our team. Nicole Tinsley has returned to our team to help us through this transition and Jason McCallum has been amazing at putting in the extra effort to ensure our clients are cared for properly. I expect to have a new person join the team in January and Sancia will be returning from maternity leave in August. I have been focused on the investment portfolios to ensure you are well positioned to prosper and I am always available if you want to talk. Your financial well-being is our priority.