With the current developments in Ukraine, our thoughts are with all those impacted and affected, from our clients at home to those abroad. See below for more insights around this ongoing situation.
From a market perspective, due to COVID, inflation, and the Russian invasion of Ukraine, global markets have been uncharacteristic this year. U.S. indexes, after outperforming for more than a decade, have already fallen 11% on the year. International companies are 7% lower, Emerging Markets (EM) are down 3%, and Canadian companies are off by 2%.
That being said, commodities are trading higher this year. Gold is 4% higher and oil stocks, well, they’ve risen 21% in less than two months.
So why are things so scattershot? It’s hard to know for sure, but there are a few factors that have likely contributed. On the one hand, high valuations, underwhelming results, tepid expectations, and interest rate hikes close at hand, have hit growth and tech companies hard. (Rising rates are generally bad for companies, but particularly for growing companies as they often require debt to grow.) And American markets have a much higher weighting of growth and technology companies than other indexes.
On the other hand, commodities are trading higher due to the scarcity created by persisting supply chain issues, inflation running hotter than it has in years, and geopolitical issues. The invasion of Ukraine has particularly influenced energy prices as Russia is one of the world’s largest exporters of oil and natural gas. Gold is often treated like a safe haven when uncertainty increases. This surge in commodities has benefited Canada, but also some EM countries. However, after years of underperformance, both trade at relatively low valuations in relation to the U.S. and some other markets.
Between COVID, inflation, and geopolitical uncertainty, I expect continued volatility as these factors play out. Having said that, it looks like the trade winds will continue blowing in the direction of value stocks, which should be good news for Canada, EM indexes, and commodities. Time will tell.
Given our religious dedication to rebalancing and a number of our holdings performing well, our portfolios have held up very well given the circumstances.  

As always, feel free to reach out if you have any questions, and if you’re looking for more timely information on the markets, you can find them on the research section of my website, or on my Twitter, Facebook, and LinkedIn feeds.

What Does Putin Want With Ukraine? by Murray Brewster: “It comes down to Putin because he has a view of history that sees the greatest catastrophe of the 20th century being the dissolution of the Soviet Union…And I think, before he leaves, he's determined to restore as much of that as he can. He's in his late 60s now and I think he's determined to do it before he leaves — bring Ukraine back into Russia by force, if necessary, preferably by bluff.”
Yuval Noah Harari Argues That What’s at Stake in Ukraine is the Direction of Human History: Insightful article on Ukraine with historical and forward-looking context.
Why Ukraine is Such an Economic Failure by Noah Smith: This article discusses Ukraine’s economic issues and how they may have contributed to the current situation.
Why the West’s Diplomacy With Russia Keeps Failing by Anne Applebaum: This article argues that the West repeatedly makes the mistake of treating Russia as if it respects traditional rules of engagement, which include being honest and forthright. As Russia clearly doesn’t, Anne Applebaum believes a more forceful strategy is required.
Wooden by John Wooden: John Wooden is considered one of the greatest coaches of all time. Over a 12-year period, his UCLA Bruins men's basketball team won an unprecedented 10 NCAA titles - seven of which were won consecutively. For context, no other team has won more than four in total!
This is my third read of Wooden. And while it’s short, it’s chock-full of great insights, not only on how to be successful, but also, and perhaps more importantly, on how to be a good person who contributes to society. One of my favourite parts is that he never talked about winning. Never. What he does focus on is that everyone should do everything they can to be at their absolute best. To that point, he considered some of his lesser known players to be the best he ever coached. Why? Because, while they lacked some of their teammates’ natural gifts, they came closer to realizing their absolute potential than some who reached NBA level.
If this appeals to you, you may enjoy the Ted Talk he did, amazingly, in his late 90s.

Our 2022 Global Outlook: The Success and Excesses Resulting from MP3 Policies by Bridgewater: Since the beginning of COVID, central banks have lowered interest rates and printed unprecedented amounts of money. Looking forward, Bridgewater believes volatility and uncertainties will increase as central banks have a limited number of tools at their disposal should economic growth falter.

Going Cashless with CBDCs and Stablecoins by Rich Turrin: Author Rich Turrin discusses the global landscape of central bank digital coins (CBDCs) and stablecoins: “China’s new Central Bank Digital Currency (CBDC) is already changing the world, and it hasn’t even launched. China’s CBDC is partly responsible for a global rush to develop new CBDCs, with 87% of central banks around the globe ‘exploring’ them, according to the Bank for International Settlements survey of central banks in January 2021.”

Silicon Valley’s New Obsession by Derek Thompson: Tech and crypto money are increasingly funding research. Derek Thompson explores the pros and cons.
Hunter S.Thompson’s Letter on Finding Your Purpose and Leading a Meaningful Life: Incredibly mature words from a then just 22-year-old author.
Bitcoin, Currencies, and Paper by Nassim Taleb: Nassim Taleb is not a fan of the Bitcoin.
France to build up to 14 new nuclear reactors by 2050 by Angelique Chrisafis: Already the world leader in the production of nuclear energy on a per capita basis, France will be adding another 14 reactors by 2050.
Volcanoes, Plague, Famine, Endless Winter: Historians and Scientists Recall 536, the 'Worst Year to be Alive' by Miles Pattenden: No matter how bad things get in the world, they have been much worse…
The Rising Risk of Civil War: Following in the Footsteps of History by Ray Dalio: “What is obvious from looking at many cycles of rises and declines of different historical cases is that the combination of…1) financial problems due to not having enough money that lead to large deficits, high taxes, a lot of money printing, and high inflation, and…2) large wealth and values gaps in which people are more willing to fight for what they want than to compromise…leads to some sort of fighting for control (rather than compromising according to the rules) which is a ‘civil war,’ though these fights can be more or less violent.”
OM Malik Interviews Brunello Cucinelli: I’m not one for the $3,000 (USD) cashmere jackets his company makes (doubt I could stomach half that price), but Brunello Cucinelli sounds like a fascinating human being and I like how he does business. Great interview!
I Have a Few Questions For You by Morgan Housel: Some great questions to ask yourself, someone you admire, or for a group discussion.

Finding Mastery with Robert Greene: Mastery and Research: What do you get when a performance psychologist dedicated to learning about mastery interviews the author of the book Mastery? A great conversation!
I’ve been a fan of author Robert Greene for years and enjoyed listening to this back and forth. It often felt more like a conversation than an interview.
Finding Mastery with Pete Carol: Competing to be Your Best: Seattle Seahawks coach Pete Carol discusses his career and how competition can help you be your best.
Master Shi Heng Yi – 5 Hindrances to Self-Mastery by Ted Talks: I think Tony Soprano had it right when he said everyone is their own worst enemy. This Ted Talk has some thoughts on how we can change that.
Cats have extraordinary obstacle avoidance abilities by Science Girl: Reason #22 for why cats terrify me. But a fascinating video!

"We have to be willing to confront the world as it is, not as we want it to be if we're going to be successful."
 – Barry McCarthy
"Extraordinary results come from ordinary people with uncommon consistency."
Shane Parish

"There is no formula for success—you just begin and then you continue. I’m often asked how to have a career in stand-up and the answer is confoundingly simple: Do the work. Over and over again, just do the work."
– Stand-up comedian Cameron Esposito on success
"All negativity is caused by an accumulation of psychological time and denial of the present moment. Unease, anxiety, tension, stress, worry, all forms of fear are caused by thinking about the future. Guilt, regret, resentment, grievances, sadness, bitterness, all forms of non-forgiveness are caused by worrying about the past."  
– Eckhart Tolle, The Power of Now
"Happiness is in many things. It’s in love. It’s in sharing. But most of all, it’s in being at peace with yourself knowing that you are making the effort, the full effort, to do what is right." 
– John Wooden
"Do the best you can until you know better. Then when you know better, do better."
– Maya Angelou
Matthew Lekushoff
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