When we wrote this letter last year we found ourselves in a time to welcome change, being hopeful about a bright 2021. To be fair, coming out of 2020, it wouldn’t have taken much to be more hopeful than during parts, or even most of 2020. Our team collectively decided to use the word “grit” to describe 2020. Having the “grit” to get through a very rough year by focusing on the passion, resiliency, perseverance, conscientiousness, and courage needed to take on future events. We said goodbye to 2020 and welcomed the change ahead for 2021. How did it turn out?
Once again, we asked the members of our group to come up with one word to describe the events of the past twelve months – the one word that would summarize how it started, how it ended, and all of the events in between. One perspective offered to describe this past year was a “trudge through the mud.” – that there is light at the end of the tunnel, but there are challenges we need to get through first. The word we came up with is a simple one, but one that has so much meaning… “progress”.
Characterizing this past year
This year we had a mix of sweet and sour words to describe how the year unfolded.
Some of the sweet words used to describe 2021 included:
- Resilient – being able to withstand or recover quickly from difficult conditions;
- Hopeful – feeling or inspiring optimism about a future event; and,
- Transition - the process or a period of changing from one state or condition to another.
Some more sour or negative words included:
- Frustration – the feeling of being upset or annoyed, especially because of an inability to change or achieve something;
- Fear – an unpleasant emotion caused by the belief that someone or something is dangerous, likely to cause pain, or a threat; and,
- Weary – reluctant to see or experience any more of; tired of.
Learnings from this past year – sweet and sour
We learned that we are resilient, that markets and people are able to recover from difficult conditions. As people, the world has greatly recovered from the pure fear that COVID placed on it in late 2019 and early 2020. As of the end of 2021, more than 50% of people that live on this planet have been fully vaccinated against COVID. In Canada, that number is as high as 77%. This pandemic that most likely will end up being an endemic, meaning that it will be present permanently – we are learning to live with this virus.
In investing, the recovery is evident in the returns of most major global stock markets. The S&P500 started 2021 at 3,764 points and ended the year at 4,766 points – a remarkable growth rate of 26.62%! In Canada, we saw the S&P/ TSX Composite Index go from 17,433 points in January to 21,222 points in December. That’s a growth rate of more than 21%!
That’s the sweet side, what about the sour side?
While markets boomed, we, as consumers, were also frustrated by a raise in inflation. Our investment dollars were rising but so was the cost of everything that we were and are purchasing. The inflation rate in the U.S. rose by 6.8% in 2021. That’s incredible. These inflation numbers have been called temporary or transitory, but we will only know at some point in the future. At the present time, market returns are outpacing inflation, however we can’t count on this every year.
We remained hopeful throughout 2021 – hopeful that there would be some end to the pandemic – hopeful that things would get better for us all. At the same time, we started the year in a state of fear – fearful when watching the insurrection of the U.S. capital in January 2021 – fearful as we went through countless lock downs and mask mandates – sweet and sour.
2021 was also a year of transition. Transitioning from fearful to hopeful, but also transitioning in how we conduct business. Working remotely for most of the year is something that wasn’t even thought possible only a few years ago. The way work was conducted pre-pandemic is not the way work is conducted intra-pandemic and perhaps post-pandemic. As the transition continues, it comes at a time when we are all weary. The pandemic has beaten down many people mentally. We are all weary of having to deal with it on a day-to-day basis, having to adjust our schedules and routines around a constant issue of safety – sweet and sour.
The word that we ultimately decided to use to describe 2021 is progress.
- Progress - forward or onward movement toward a destination.
Where do we go from here?
That is still to be determined. From an investment and planning perspective, the message stays the same. Stay invested, make sure that your asset allocation is appropriate for your individual risk and return requirements. Rebalance your portfolio on a regular basis to take advantage of price changes without trying to time markets. Be diversified, reducing your risk to anything but just the risk of being invested. Keep your fees and expenses inline, and check them by doing a regular financial plan update and review.
Investments and investing can be straight forward, but it requires that you ignore and avoid the noise that can lead you on the wrong path. By starting with a plan and following it, even during stressful times, you will be making progress and come out ahead.
The message of last year still remains true to this day: having grit. Throughout the past year, you, our clients, continue to show true grit and because of that we are making progress together. Each one of you demonstrating the courage to stay invested during extremely volatile times, and as a result, are seeing progress in your results. You have all shown the courage needed to stay invested even during times of fear. Being resilient when faced with continued COVID frustrations, being hopeful when at times it may be easier to be fearful. Embracing the transitory nature of all things we do, and have done, even while being tired and weary of the pandemic. We are making progress together, we continue to ‘trudge through the mud’ and there is a light at the end of the tunnel that keeps us going.
Conclusion
We are making progress together. We, as people, as a business, and as a society have transitioned the way we work and the activities we do. We remain hopeful for a brighter future, we continue to be resilient in adapting to changing conditions. We are making progress, progress towards a better future.
Wishing all of you a happy, healthy and prosperous 2022!
The CM Group