Market Update: Climbing off the Wall of Worry

Have you ever wished for the ability to see into the future? Does it seem like our world is becoming more complicated every day? Understanding the financial markets and the global economy can seem daunting but in our November presentation of Wise Money Talks, we had the great fortune of being joined by Nadeem Kassam, Head of Investment Strategy, Private Client Group and Dr. Luiz Furlani, Associate Investment Strategist at Raymond James. Together they distilled thousands of hours of research into an informative market update on the economic outlook of the financial markets.

We are still managing the lingering effects of COVID-19

Nadeem and Luiz pinpointed the key drivers of the economy in what they coined the “Wall of Worry.” As a population, we are still managing the lingering effects of COVID-19, which include the possibility of further lockdowns. In the wake of a steep market sell-off in February and March 2020, where the World MSCI Index fell over 34%, government support has carried the financial markets to record highs and investors wonder if this performance is sustainable into the future. Higher inflation levels are making headlines, but whether inflation is persistent or not remains unclear.

Reflecting on their decades of combined experience of both market growth and recessions, Nadeem and Luiz break down this “Wall of Worry” brick by brick. They made note of the scientific achievement of multiple vaccines developed in the same year in which a global pandemic emerges and view vaccinations as a critical component to lifting government lockdowns, which will strengthen global supply chains as the population returns to work. Businesses will rebuild their full production capabilities which will reduce long term supply-driven inflation. This makes for a great recipe for further global growth.

While the economy is primed for further growth, there remain small pockets of volatility.

Nadeem and Luiz are optimistic about the future economic growth in Canada. During the lockdowns, Canadians amassed the highest level of savings since 1960 due to a lack of spending options. Consider how your spending and saving habits changed throughout the pandemic. Did you notice drastic changes?

Over the next few years, Nadeem and Luiz project these savings to flow into the economy in the form of consumption and business investment. Their economic indicators also point towards the global economy positioned in the early-mid phase of the business cycle with further room to run. After all, the financial markets are built for making money.

In their closing summary, Nadeem and Luiz believe that while the economy is primed for further growth, there remain small pockets of volatility. How does this impact decision-making when it comes to investing? Simply put, they recommend that investors should work with their advisors to review their portfolio strategies. A well-diversified portfolio of stocks and bonds is essential for investors to reach their long-term goals.

If you missed our November 9 Wise Money Talks Market Update and 2022 Outlook workshop with Nadeem and Luiz, you can find their event recording on Sophia Wealth Academy’s YouTube channel. You can also download their presentation and supporting resources here (PDF document).