E11: Third Quarter Letter 2022 - Opportunity Knocks

Foreign. This podcast is brought to you by Ginsler Wealth. The information discussed today is meant to be general in nature and not tailored to your specific investing circumstances. This means that you should talk to your regular Gensler wealth advisor or your own advisor before acting on any information we discuss today. Nothing in this podcast is intended to be a solicitation and past performance does not guarantee future returns. I almost have this thing memorized now. Today on the unlimited podcast will be a read through of my 2022 third quarter client update letter released in early October 2022. We're going to cover what's been going on in the markets for the last year. We're going to talk about why this is an opportunity and what Gensler wealth is doing to capitalize on that. Let'. Ginser Wealth 2022 Third Quarter Client Update October 2022 to Gensler Wells clients the economic and investment climate remained very challenging in Q3 following a very difficult first half of the year. As at September 30, 2022, the US equity markets as measured by the S&P 500 are just 6% above where they were in February 2020, just prior to the pandemic, after having risen 41% above the February 2020 peak and 107% from the March 2020 lows. For those who can go on the website, go and see this letter. You will see a variety of charts throughout. I encourage you to go to our website and find it, but there's a chart that highlights the tracking of the S&P 500 from the beginning of 2020 all the way through to now, with some lines and detail explaining what I've just described. The Canadian equity markets as measured by the S and P TSX index are just 3% above February 2020 levels after having risen 23% above the February 2020 peak and 97% from the March 2020 lows. And we have a similar chart showing the performance of the s and P TSX, the Canadian equity markets from the beginning of 2020 until now. Annotated Canadian bonds as measured by the S and P Canada Aggregate Bond Index are down almost 11% this year. Central banks continue to raise interest rates to fight high inflation and Russia continues its war with Ukraine. It is reasonably likely that all the equity market gains made from the time COVID 19 began will be erased two and a half years gone. So what does this mean? Opportunity knocks. While it is easy to focus on the negative, we are focusing on opportunities this environment presents for Gensler Wealth. This means taking the following 1 looking at historic trends, especially equity market returns 2. Adjusting your portfolio and or finding new strategies 3. Putting cash to work, even if just to earn more than bank account interest 4. Taking time to plan and 5 focusing on your health Looking at historic trends While all client portfolios are tailored to your specific needs, goals and objectives, in general your investment portfolios with Gensler wealth include more than just traditional stocks and bonds. This diversification has helped insulate your assets from some of the challenges of this year. However, we still believe that over time, equity should be the highest return contributor to your overall portfolios. What does History say about Equity Returns Following Large Declines? Now we have a table in the letter that you can see on our website and a chart. And the table and chart show that following declines of 25% or more, the S&P 500, the barometer of the overall US equity market, has historically gone on to post substantial gains. Now, I won't describe the table in intricate detail for the listeners here, but I will describe the following chart which summarizes the table and again I encourage you to look at it. Maybe a couple quick highlights on the table. First of all, 24689 there's been about nine times in the last 60 plus years where the S and P has fallen more than 25%. And when you look out one year, three year, five year and 10 years, you can see what happens following those declines. So first of all, the average decline during these nine periods is down 38%. The average return following these periods after one year has been 22% positive. After three years, 37% positive. After five years, 83% positive. And after 10 years following a major decline of 25% or more, 214% positive. As Ben Carlson says in the article where the data that I just described was reported, and this is a quote, history provides no guarantees for the future, but I do find some level of comfort in knowing that buying stocks when they're down big like this tends to offer positive outcomes. Adjusting the Portfolio and Finding New Strategies While the data above or the data I've just described should provide a level of optimism for equity returns going forward, I do Note that the 2022 decline shown in the table above is also the smallest major decline. There certainly could be more pain in the short term, but the current environment has also created opportunities in other areas. These are just a few of the strategies we are either adding to or exploring on your behalf. Actively Managed Bond Portfolios as interest rates have risen, so too have yields on these portfolios and we are confident that the managers we utilize are well aware of and planning for potential future interest rate increases, agriculture, infrastructure and other assets that could perform well in inflationary and or recessionary environments. Structured notes that provide dramatic downside protection along with the potential for high interest payments or magnified returns and cash management opportunities. Ways to earn a better return on cash that is sitting in your bank account, which we'll discuss in our next section. In finding new strategies, we have spent a significant amount of time reviewing investment opportunities from existing and new managers, exchange traded fund providers and even the banks. That's the structured notes I mentioned. We do not make investment decisions lightly. Our due diligence process is detailed, rigorous and thorough. For instance, we recently reviewed all the legal documentation which was a few hundred pages for a US Based fund that could be a good fit for certain client portfolios. In our review, we believed we had found one very important missing word. The missing needle in the haystack, if you will. After inquiring, we received the following redacted for the benefit of the sender email back from the manager and here's a quote. Gensler Wealth Team it turns out you are quite correct and our hilariously expensive New York City attorneys missed a very important word in the blank clause. You rely on us to be thorough and thoughtful before investing your money. We take this responsibility very seriously. Putting Cash to Work we know some investors are concerned about the current economic environment and have been sitting on cash in their bank accounts. This cash earns next to nothing and net of inflation. Its value is being eroded due to demand from existing and new clients. We have compiled a section of lower risk shorter term cash plus strategies that we believe could provide a higher and potentially more tax efficient return on dormant cash. In the letter we include a chart that provides a comparison of bank high interest saving account rates versus the target return on the Ginser wealth cash management mandate and I'll describe it very quickly and easily. Between Tangerine, RBC, CIBC, TD, Scotia and BMO, the high interest saving account rates excluding any one time or promotional bonuses is between 1% and about 1.35 or 1.4%. The Ginser wealth line here in our target return for our mandate is somewhere in the range of 3%. This is based on bank websites. As of October 7, we believe a reasonable portion of the target return in the Gensler wealth strategy should come in the form of capital gains which are taxed at half the rate of interest income. As a result, the net differential return after taxes relative to the bank savings accounts should be even higher than illustrated in the chart that I've described. While high and rising interest rates are bad for borrowers, they are beneficial to savers taking time to plan. When investment gains are challenged, it is a reminder that keeping every dollar is even more important. On the planning side, we've been working with several clients to introduce more tax effective trust and corporate structures. This planning can serve to potentially minimize taxes over time and or at the time of a business sale while also protecting the owners of the assets from lawsuits and or creditors. Doing the structuring work today could lead to perpetual risk free returns in the form of ongoing tax savings. We are also continuously seeking opportunities to harvest investment losses to be used in the future to offset capital gains. While no one enjoys crystallizing losses when other opportunities present themselves, as in the things we've described above, switching out of current losers can lead to tax savings on future winners Focusing on your health finally, while finances and investments are what we do and are important, we aim to be helpful in many aspects of your lives. It is often said that health is wealth and we totally agree with this sentiment. As such, through a new relationship with Medcan Ginser wealth, clients can now enjoy a 15% discount on Medcan's flagship comprehensive health assessment along with three other advanced health tests. Please contact us if you want to take advantage of this. We are also exploring partnerships with other health organizations with the goal of bringing more value to you in the future. During the past quarter we also recorded an unlimited podcast about the state of mental health care in Canada with Dr. Juveria Zaheer and Sandy Treliving, both involved with Toronto's center for Addiction and Mental Health, also known as CAMH. Mental health is an equally important component of your overall health and we hope this podcast episode can help provide some insights into what you can do to help others or manage your own mental health. I encourage you to listen to it if you haven't already. Here's some closing thoughts as we head into the final stretch of 2022. I don't believe uncertainty or volatility will dissipate. Our role on your behalf is to seek out opportunities this challenging environment presents. I hope you can tell we are on it. Thank you for your trust, support and confidence. We are available 247 should you need us. Sincerely, me Brian Gensler, President and CEO of Gensler Wealth. Well, thank you very much. That is the third quarter of 2022. Client update. More to come, More exciting podcasts on the way. Follow us and wishing you all the best for the Latter Part of 2022. Looking forward to 2023 already. Bye bye.

This has been the Gensler Wealth Audio production. The unlimited podcast is hosted and produced by Brian Gensler, edited and mixed by me, Catherine Donville. Always remember that past performance is not indicative of future returns. If you're interested in hearing more from us, please like subscribe and give us a five star rating and follow us on all social media. We can be found at Gensler Wealth. See you next time.