Brighter Days Ahead

Though I am usually more sparing with my words, this year deserves more reflection than most. The pandemic has reached an extent that we have all now been touched by it, closer to home than any of us would like. The point of this letter is not to harp on the negative, the daily news media does enough of that, but to look back and see what we can take from this year that improves our future.

To start, there were several events last year that are worth cheering. The science of vaccinations has advanced extraordinarily to face this pandemic. Within two days of obtaining the genetic sequence of the disease, Moderna had developed their vaccine. While the testing process is time consuming, the speed with which this vaccine was developed is truly astonishing.

Though we may now be quite tired of Zooming, we should also cheer the technologies that allowed us to stay connected, work from home and live out this pandemic with far better connectivity than ever before. Had this pandemic hit but a decade earlier, the social isolation and impact on the economy would have been far worse.

The economic and stock market recoveries were quick and powerful. Canada has recovered most of the jobs lost in March and April already, suffering only about a 3% decline in GDP over the full year. Most stock markets have surpassed their previous highs in a recovery that went far more quickly than any would have expected in the middle of March, when stock markets were falling like a knife.

The lessons that we take from a year like 2020 are anything but new. However, last year provided a powerful reminder that these time-tested truths remain relevant, regardless of the nature of the turmoil:

• Predictions are entertainment, not advice: None of the economic and market outlooks published by the big banks and investment houses predicted that a pandemic would bring the global economy to a halt in 2020. It is the information we don’t know today that will change the course of stock markets tomorrow.
• Markets move faster than you or I do: As the pandemic’s devastating breadth became clearer, stock markets dropped very quickly in response to every piece of new information. And just as suddenly, stock markets turned around and zoomed (pardon the pun) back up. In fact, the three days following the bottom on March 23^rd saw a 17.5% rise in the S&P500 index of US stocks. Unfortunately, those who got out of the market during the fall on the pretense of waiting for things to calm down were quickly left behind.
• Politics and markets don’t mix: Many rightly feared how the US election might unfold in the months leading up to it. These fears were well placed; the recent events in Washington on January 6^th confirmed as much. Yet stock markets continued to climb through the worst of these fears.
• Diversification can be frustrating, until it saves the day: Bonds aren’t paying very high interest rates, but for those drawing from their portfolios or about to, they meant the difference between complete panic and staying the course.

For portfolios, there is one more element from late 2020 to cheer. In the fourth quarter, we finally saw value and small cap stocks perform better than growth stocks and international markets outperform the US. For many years we’ve watched large cap US growth stocks (tech stocks in particular) scream ahead while the rest of the US market and the world languished behind. As I said, diversification can be frustrating, until it pays off!

You’ll have noticed that I made several changes to the team during the year. Sarah Boussâa was hired as the Montreal Front Office Leader early in the year and her potential quickly shone through. We asked her to be a part of the Layton-Guay team full time in September to focus her talents on taking care of our clients. Sarah assists me, schedules client meetings and supports Simona on paperwork as Simona takes on more responsibility as well.

Kevin Ligot was originally hired as a maternity leave replacement in our Operations group. With an MBA in Finance, his skills were too strong to let him leave the organization at the end of his mandate. He is now a Research and Portfolio Analyst in the Layton-Guay Team, supporting Shweta with portfolio analysis and rebalancing.

Julia recently completed her bachelor’s degree in at the Université de Québec à Montréal and was promoted to Wealth Management Analyst in September.

After flirting with it for some time, we finally crossed the $500M mark in assets under management in the team. This comes as the firm has now surpassed $6B in assets under administration. As such, you can expect to see more new faces in the team in the year to come. I look forward to introducing them to you!

As always, if you have any questions, please don’t hesitate to reach out to me or the team.

Best regards,

Peter