Since viewing the Kennedy Centre 2021 honoree ceremonies, including Saskatchewan native Joni Mitchell, I have not been able to lose the earworm from her famous 1969 hit song.
I doubt when she wrote the lyrics she was thinking about stock investing, yet her descriptive words about clouds are in many ways analogous to such activity. These famous words serve as a fitting backdrop for my first article written in the new year, as I look back on 2021 and forward to 2022.
There are many issues to consider while investing, with each issue having both positive and negative implications, making it important to look at both sides of each issue. For instance, the non-housing portion of the Canadian economy is weak, making it look like investment in Canada might be the wrong choice. Yet, it was at such a juncture in 2008 when Canada looked like a star and the United States was weak — that American equities started their more than decade long dramatic outperformance over Canadian and other world markets.
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Almost a year ago, in an article that appeared in the March 9, 2021, issue of Grainews, I shared my 2021 predictions. Let’s look at how they turned out and what might be in store for 2022.
1. I predicted that most predictions would be wrong. That was a perfect prediction. Nobody — absolutely nobody — predicted equity markets would be as strong as they were. By the way, this prediction can also apply to ag commodities.
2. I predicted the S&P 500 would be up modestly, perhaps five per cent. Wrong. It finished the year with a total return of 28.7 per cent.
4. Lastly, I predicted that “while the intelligentsia thinks inflation will remain low,” I thought it would close out the year at three per cent. Inflation at the time was one per cent and blew past my prediction. While not a perfect prediction, it was vastly superior to our financial authorities and most market prognosticators.
While predictions are fun, they are largely irrelevant, and I make them mostly to poke fun at the process. What is important is how our portfolios performed, and on that front 2021 was spectacular. The Tax-Free Savings Accounts (TFSAs) for my wife and I averaged a 24.3 per cent gain. Our RRSPs averaged a 28.7 per cent gain and my newsletter taxable account was up a jaw-dropping and almost embarrassing 53.6 per cent. It now carries a six-year compound annual growth rate of 21.4 per cent. (Subscribers receive information on all portfolios.)
The Grainews Titanium-Strength Portfolio, which is a model rather than a real portfolio, continued to illustrate the simplicity with which excellent returns can be achieved. It appreciated 19.3 per cent and is now up 52.8 per cent in 3.5 years.
What do I see transpiring in 2022?
1. Most predictions will be wrong, and markets will continue to unfold in unexpected ways.
2. I think there will be more volatility in 2022, and that the S&P 500 will end about flat with current levels. Some air has been let out of the speculative “Specs and SPACs” balloon (SPAC stands for special purpose acquisition company), but there is still a ways to go. There has been a modest move to value-type stocks which should continue.
3. I remain optimistic on commodities and the Canadian market, once again predicting our market to be up “in the teens,” despite investment-repellent policies of many of our governments. Ironically, the hated resource sector is likely to be the largest contributor toward bailing out the Canadian economy.
4. I think inflation will subdue somewhat but remain above financial authority goals. I find it ironic and sad that while many western governments purport to want less wealth and income inequality, they are simultaneously pursuing inflationary policies, which will only exacerbate those inequalities. Energy inflation and government debt will likely usher in the next recession, but I don’t think that will happen yet in 2022.
The real important point when it comes to predictions is, “I really don’t know clouds at all.” And neither does anybody else!
I would love to hear from you. As I enter my fifth year as a columnist, it would be nice to hear from readers. Please email [email protected] with comments. Have I helped or hurt your investment results?
