February 2022 Portfolio Management Team Update

Elvis Picardo

February 22, 2022

February 2022 Portfolio Management Team Update
By Elvis Picardo, CFA®, CIM, Portfolio Manager, iA Private Wealth
February 16, 2022

Market & Economic Environment
January was the worst month for global equities since March 2020’s “Pandemic Panic,” as concerns about inflation and the prospect of rising interest rates took a toll on technology stocks.

The TSX Composite declined 0.4% last month, outperforming most major indices, thanks to its substantial overweight in value-oriented, cyclical sectors like financials (+4.0% in January) and energy (+12.5%). Gains in these two sectors and a marginal advance in the communication services group offset declines in the TSX’s eight other sectors. The technology sector was the biggest laggard with a 20.4% decline, as Shopify plummeted almost 30% in the month.

U.S. indices endured a rough start to 2022, with the S&P 500’s 5.3% drop making it the worst January performance since 2009, while the Nasdaq’s 9% plunge was its biggest monthly decline since March 2020. The Dow Jones Industrial Average fared better on a relative basis, with a 3.3% pullback. Small-cap stocks were hit particularly hard by the market downdraft, with the Russell 2000 down 9.7% in January, compared with a 5.7% decline for the Russell 1000.

(Data Source: FactSet)

Our Strategy
Investors have been in an unforgiving mood so far in 2022 and have been swift to punish stocks that have been unable to meet (unrealistic) growth expectations. Some of the biggest names in technology have not been spared, as concerns that growth may slow from the phenomenal increases recorded during the pandemic have resulted in huge declines in stocks like Meta Platforms (-36% YTD), Netflix (-34%) and Shopify (-46%).

Although the Bank of Canada and U.S. Federal Reserve did not raise interest rates at their January meetings, the hawkish tone struck by both central banks has led investors to recalibrate their forecasts for rate hikes this year and brace themselves for more rate increases than expected as recently as year-end 2021.

The risk of war arising from the Russia-Ukraine conflict is the other uncertainty presently weighing on sentiment. This geopolitical risk has escalated just as much of the world seems to be finally coming to grips with the pandemic, as many countries solidify reopening plans and ease restrictions.

The Portfolio Management Team (PMT) has been vigilant in monitoring changing market dynamics and has used market dips to invest client contributions in registered plans. The PMT also made portfolio changes in January to boost allocation to the financial and energy sectors. Overall, the PMT believes client portfolios remain well-positioned for a turbulent year ahead.

Please contact any member of the PMT if you have any questions or concerns regarding your accounts.