Arturo Saltarelli, CFA, Investment Advisor of RBC Dominion Securities Inc.

10/07/2022

Happy Thanksgiving to all! I am thankful for my family, friends, business partners and the trust of loyal clients. Wishing you a festive weekend!

07/11/2022

Recently, I have been hearing the "R" word often.

But, if you are a true long term investor, what does that matter ?

Regardless of whether a recession is already upon us, right around the corner, or could materialize within the next year or two, the bigger question for investors is: To what degree has the U.S. equity market already factored in a recession?

An important point to consider when thinking about equity market behavior surrounding recessionary periods is that there is no single playbook—there is no "typical" recession, and there isn't much that can be considered typical market behavior associated with them. This is illustrated by the table attached.

There is ONE very visible pattern in the historical data, however.

In all but one of the previous recessions since 1937, the equity market troughed before the recession officially ended.

This reinforces a point we make repeatedly: Attempting to time the market bottom is usually a fruitless exercise. Equity markets tend to be a leading indicator.

The market typically bottoms well before the economic clouds part, often when headlines and investor sentiment are still rather negative.

In my view, market timing is a trading tactic for fast money, not an investment plan designed to align with your long-term goals.

If this market has you shaken up, or you are simply looking to validate if what you currently have in place is working as you intend it to be, I am happy to discuss.

Who knows....you may even walk away with a few ideas to help you reduce fees and taxes that you didn't know existed.

450-686-3490

05/25/2022

A few weeks ago I had the privilege to be hosted @ Centre Communautaire de la Petite Italie (CCPI) along with my grandfather, Arturo Senior.

We had the honor of cementing his (and my late grandmother's legacy) at the CCPI's historic community center on Jean-Talon street by taking part in their "Wall of Memory" project. The project is a beautiful mural of plaques , each showcasing some information about a given Italo-Canadian immigrant family in our community.

The CCPI's director, Ms. Giovanna Giordano, graciously hosted us on site for a ceremony, and, with typical Italian hospitality, offered us an espresso , some baked goods and engaged Grandpa in a conversation before we put up our plaque.

Giovanna asked my grandfather to reflect on some of his fondest memories from their early immigrant & settlement years.

When I was younger (and admittedly less mature), I sometimes used to roll my eyes or chuckle when my grandparents told stories, thinking "here they go again with THAT story".

And so, as you can imagine, came Grandpa's reply of the inspiring stories of the many things he and his community did to support one another with very limited resources and the jobs or businesses they started to provide for themselves. So many wonderful stories of love for his family, pride for his "old country" and indeed pride for the "new home" that gave he and my grandmother the chance to build a life that fulfilled their dreams.

These days, as you may be able to realize, when my grandfather speaks, I decide to listen attentively and open my eyes instead of rolling them…

Unfortunately my grandmother passed away in 2020, and I never got the chance to see what would have surely been a smile on her face as well. I offered this to my grandparents as a gift. I had been wanting to do this for years now.

Instead it was I who was awarded on that day with a gift: an moment of beautiful symbolism. Almost as if it had been done on purpose; I realized, there next to me sat my grandfather at the perfect angle. He was seated at the table, and from my point of view – over his left shoulder stood the Italian flag, over his right, stood the Canadian flag. In the middle sat a proud and teary-eyed Nonno Arturo, my literal and figurative bridge between the two countries.


As I reflect back on that wonderful day, I am reminded of a few important things:

1) We are all enjoying things either directly or indirectly thanks to a selfless sacrifice someone has made in our past. Recognition is a virtue.
2) We have two ears and one mouth for a reason. Use them wisely.
3) Life is short, therefore we must cherish every special moment or connection we get to enjoy.
4) A legacy, much like that stoic wall, is often built with lots of hard work and one carefully placed brick at a time.

Perhaps if I am lucky enough, one day my grandchildren will also roll their eyes when I repeat this story...over and over again.

Here is that picture.

05/13/2022

Despite the current challenges, we believe the U.S. market has the potential to deliver worthwhile gains over the next 12 months, consider the following:

-Our economists anticipate domestic inflation pressures will recede somewhat in the second half of the year.

-Recession risks are still no worse than moderate according to a range of our indicators.
-We think the Fed has some room to raise interest rates without breaking the economic expansion, and will assess the impact of its rate hikes along the way.
-Earnings trends are still generally good at a time when the S&P 500’s price-to-earnings valuation has become cheaper at 17.3x the 2022 consensus forecast; and
-Investor sentiment is quite bearish, and this is typically a contrary indicator for the market.

However, I am not trying to call a market bottom here. Nobody can. It’s important for investors to recognize this is indeed a unique period with peculiar challenges that are well outside the scope of a normal business cycle.

Supply chains have not fully recovered from the previous COVID-19 disruptions, and new supply chain pressures have accumulated due to China’s renewed lockdowns the crisis in Ukraine along with the related sanctions on Russia.

These factors make it more challenging for central banks to tame inflation, particularly since the Fed began hiking rates late into the inflation surge.

We think equity markets are having difficulty gauging the lingering impact of these unique pressures on economic and corporate earnings growth and how long they will last—thus the volatility and lengthy selloff.

At this stage, it’s worth putting things into perspective and begin considering historical performance trends surrounding previous high-inflation episodes, and during “growth scare” and recession scenarios.


To read more, please click here: https://ca.rbcwealthmanagement.com/arturo.saltarelli/blog/3350446-Can-this-volatile-stock-market-regain-momentum

03/18/2022

With the door finally closing on the post-pandemic era of near-zero interest rates, what does history tell us about the direction of U.S. equities during Fed tightening cycles?

Somewhat surprisingly, stocks have performed well in most cases, after an initial period of flat returns (see chart).

RBC Global Asset Management Inc. Investment Strategist Eric Savoie studied the monthly performance of the S&P 500 Index before and after the first rate hike of the 17 cycles since 1954.
In the year leading up to the first hike, stocks gradually rallied across all instances. This makes sense, as the Fed would only start to hike if the economy was doing well enough to weather higher rates.

After the first hike, equity market performance typically depended on whether the hiking cycle triggers an eventual recession.

In the nine cases when a recession was avoided, the index posted median returns of 6%, 13%, and 28% after six, 12, and 24 months, respectively.

During the eight recession cycles, returns were flat after an initial bump higher, posting median returns of 8%, 7%, and 7% over the same periods.

The worst post-hike returns were precipitated by external events, with the OPEC shock of 1973 triggering a severe recession and bear market.

Given the Fed board members' consistent acknowledgment of the dangers of over-tightening, we expect the current cycle to follow the non-recessionary path, although we also caution that inflation hasn't been this high in several decades.

02/25/2022

First and foremost, my thoughts and prayers are with any of our clients, family, friends, and colleagues who may be impacted one way or another by developments in the region.

While we have a responsibility to focus on the investment implications of such a crisis, it's important to recognize the human toll these conflicts can have.

Even though Russia's strikes on Ukraine have no analogues in modern warfare—especially due to Ukraine's relationship with NATO countries—it is important to keep in mind how financial markets generally reacted to previous wars and serious geopolitical events.

After all, almost all of those situations were also unique. In the 18 post-World War II events that we evaluated, the S&P 500's selloff was limited in magnitude at 6.2 percent, on average, and typically played out over a brief period, as the table illustrates.

At times the selloff commenced before the actual war/hostility started (as in this case), and at other times the selloff began right when war or the event hit.

Our table attempts to take into account any relevant pre-war and pre-event periods of weakness.

12/03/2021

A picture says 1,000 words...

The emergence of the highly-mutated COVID-19 omicron variant, coinciding with the upcoming arrival of winter, is casting a shadow on the macro outlook.

As we await more concrete details about omicron, we believe a more robust arsenal in the battle against COVID-19 and a look back at the economic effects of each previous "variant of concern" (VOC) suggest any negative effects on markets are likely to be fleeting, albeit accompanied by unsettling volatility.

You can read more in this week's blog post: https://ca.rbcwealthmanagement.com/arturo.saltarelli/blog/3178656-The-omicron-variant-A-heavy-dose-of-uncertainty

10/08/2021

Happy Thanksgiving to all my clients and partners - I am thankful for your support and loyalty.

Wishing you and your families health and happiness for the long weekend!

09/16/2021

As the summer holidays unwind and come to a close, I have been seeing an increased interest from individuals in my network about getting serious regarding their retirement plans.

I get it, financial planning isn’t always going to be our top of mind priority as we try to enjoy some sunny summer days and precious time off to relax/rejuvenate (especially in these current times).

In my latest blog post, I share some thoughts on the similarities between retirement planning and taking a flight (it's amazing the things that come to your mind when you can disconnect during a 9-hour plane trip LOL.)

I also share a handy retirement planning checklist for readers to take advantage of!

If you are currently retired or planning to take your retirement in the next few years, I know you'll find it useful!

If you take the time to read, I thank you in advance and would love to hear your thoughts & comments - feel free to post below ...

I share some thoughts on the similarities between retirement planning and taking a flight & I share a handy retirement planning checklist for readers to take advantage of.