What Factors Could Have Affected Your Investments in 2022?

January 12, 2023

2022 Year in Review

Photo by Maxim Hopman on Unsplash

There have been a number of markers over this past year that could have played a major role in how your investments have been doing. In addition to the COVID-19 pandemic, add escalating interest rates, war, disruption of the supply chain and, inflation.

Read more: What Factors Could Have Affected Your Investments in 2022?

At the start of 2022, the entire globe was in the grasp of the fifth wave of COVID-19 and now, as the year is nearing its end, signs are pointing to a global recession. A light on the horizon suggests the pandemic is behind us, or at least nothing like it was in January of this year when it continued to ravage the economy.

War in Ukraine

One of the largest impacts in investing this year is the war in the Ukraine and it is still causing the most global uncertainty. Western sanctions on Russia created a food and energy price explosion compounding and elongating inflation around the world. Governments had to ramp up spending to alleviate business and household costs. These sanctions also were an offshoot of steep interest rate rises in major central banks.

Both the cost of living hike and recession alert, Reuters has reported, coupled with a global liquidity drain, have increased geopolitical risks. So, mixed investments in stocks and bonds had their worst year in a century.

Uncontrollable Factors

Whether you are a novice or an expert investor, there are certain dynamics outside your control and these will always have an impact on your investments:

Interest Rates

This year we saw a significant increase in the Bank of Canada’s key rate, now standing at 3.75% compared to 0.25% at the beginning of the year. It’s been nearly 15 years since rates have been that high and while it’s unlikely any more major hikes will take place, rates will likely remain high in 2023.

Current Events

World events like wars, natural disasters and elections can have both direct and indirect effects on the stock market and savings. If you’re an investor, keeping abreast of what’s happening around you is important. A small occurrence can cause a huge shift in social consciousness and a political decision can have a real-time effect on the supply and demand of certain products or companies in which you have invested.

Commodity Prices

Fluctuating commodity prices have a major impact on public company earnings and investors. For example, prices of commodities like lumber, oil, cotton, wheat, coffee and gold depend on supply and demand. When you’re looking to invest in a certain sector or company, it might be helpful to take a look at relevant commodity prices and keep track of major market changes.

Unemployment

Consumer spending is adversely affected when there is a lack of jobs. When consumers keep too much money in their pockets, the economy suffers. Even if you have a job and you’re doing well, your investments will be affected by the spending patterns of Canada’s residents.

Taxes

Taxes lower your real returns, however, planning ahead can minimize the damage. Holding on to stocks and other investments for more than a year, for example, will lower your capital gains tax. Having the right mix of stocks and bonds in your portfolio and selling off low-performing investments might also work in your favor during tax season.

There are many factors affecting investing. Staying informed and knowing what’s happening in the markets can help you make better decisions to maximize your returns. If you don’t have the time to devote to staying on top of the markets, you might want to enlist the guidance of a financial advisor.

Be sure to tune in monthly in 2023 for my continued thoughts on the markets, how they may change and what to expect.

Looking to make a change, want a second opinion, or looking for additional advice? Feel free to reach out to me any time by phone or email.

Author Steve McBride, Investment Advisor, Echelon Wealth Partners, looks forward to connecting with you about your future wealth management needs.

Disclaimers

This blog is solely the work of Steve McBride for the private information of his clients. Although this author is a registered Investment Advisor with Echelon Wealth Partners Inc. (“Echelon”) this is not an official publication of Echelon, and this author is not an Echelon research analyst. The views (including any recommendations) expressed in this newsletter are those of this author alone, and they have not been approved by, and are not necessarily those of, Echelon.

Echelon Wealth Partners Inc. is a member of the Investment Industry Regulatory Organization of Canada and the Canadian Investor Protection Fund.

Forward-looking statements are based on current expectations, estimates, forecasts and projections based on beliefs and assumptions made by authors. These statements involve risks and uncertainties and are not guarantees of future performance or results and no assurance can be given that these estimates and expectations will prove to have been correct, and actual outcomes and results may differ materially from what is expressed, implied or projected in such forward-looking statements.

The opinions expressed in this report are the opinions of this author and readers should not assume they reflect the opinions or recommendations of Echelon Wealth Partners Inc. or its affiliates. Assumptions, opinions and estimates constitute this author’s judgment as of the date of this material and are subject to change without notice. We do not warrant the completeness or accuracy of this material, and it should not be relied upon as such. Before acting on any recommendation, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. Past performance is not indicative of future results.

These estimates and expectations will prove to have been correct, and actual outcomes and results may differ materially from what is expressed, implied or projected in such forward-looking statements. Echelon Wealth Partners Inc., its divisions, subsidiaries, and affiliates, do not provide any income tax advice and does not supervise or review any income tax returns. Please consult your accountant.

Source(s): 

https://www.bankofcanada.ca/2022/11/restoring-labour-market-balance-and-price-stability/

https://www.forbes.com/sites/qai/2022/11/09/how-do-investors-prepare-for-a-recession/?sh=7dae9bbc5895

https://www.manulifeim.com/retail/ca/en/landing-page/market-intelligence?cid=CA-EN_MIM_RT_PS_AdWords_2022Value_ThoughtLeadership_____PH______investments_ManulifeGenericInvestmentManagement&utm_source=PS&utm_medium=AdWords&utm_campaign=2022Value_ThoughtLeadership&utm_term=investments_ManulifeGenericInvestmentManagement&utm_content=CA-EN_MIM_RT_____PH_____&gclid=Cj0KCQiAyracBhDoARIsACGFcS7-lCyK-swQWItqlO8jFH6VEn9VEyMb9qj_X4IGibWkdKEOwJf7NQUaAp0eEALw_wcB&gclsrc=aw.ds

https://www.raymondjames.ca/commentary-and-insights/markets-investing/2022/11/18/2022-tax-loss-selling-season-less-money-new-problems