Bill’s Blog | December 17th, 2021
As we come to the close of another year, it is always a great time to reflect, journal and process what occurred in the year with your life. What were your main lessons from 2021? I have done journaling for over three decades, and I take quarterly day retreats to evaluate my life. I look for ways to continue to grow as a person, my business, my health, my core relationships, my spiritual life and learn from my mistakes. This practice of day retreating and journalling has profoundly impacted my life, and you may want to consider doing this yourself if you have not done so already. As the famous Greek philosopher, Socrates wisely said, “An unexamined life is not worth living.”
To no surprise, 2021 was another turbulent year for us on many levels. If you read my last blog, you will know we are in the “Fourth Turning” cycle. We seem to be coming to another economic turn in the markets as they wobble from record highs. I have also learned that market extremes can last a lot longer than I thought possible, but there is always a day of reckoning. We are ending the year with significant volatility in all markets (stocks, bonds, precious metals, crypto’s, currencies, etc.). Several major real estate developers in China are in the process of going bankrupt due to excessive debts (100’s of Billions) and falling property prices. Chinese real estate equals 20% of the nation’s GDP, which is a severe problem. These defaults are causing economic ripples worldwide due to foreign investment in these companies and developments. Central banks continue to rattle the markets with the constant blah, blah, blah and often called Fed-speak. History has proven that central banks are always behind in their policies and are late to react, proving true again. We also have several hot spots with high geopolitical risks. But, the giant gorilla in the room that affects all of us is very high inflation, as it is negatively impacting country after country. Finally, the newest strain of covid is panicking the globe, but the data coming in so far is positive (yes, highly transmissible, but less deadly).
When there are seismic changes in the financial world, I strongly encourage you to pay attention. But, unfortunately, too many people have become complacent with their financial plans, thinking what has worked for the last decade-plus will continue. It may or may not. In a low-interest rate and inflation environment, buying passive funds, real-estate, leveraging your investment has worked brilliantly. However, we no longer have low inflation. The financial wizards continue to warn interest rates will rise, the massive trillions in stimulus by central banks will diminish, and even some politicians realize their endless fiscal deficit binges have consequences and should be stopped or curtailed. Historic typical interest rates have been between 5 to 7%, a mere increase in 1.5 to 2% rates would be disastrous due to the extreme global and personal debt levels!
So, what can we expect in 2022?
- Inflation will continue to run hot in 2022 and most likely beyond.
- As people realize the higher living costs are persistent, many employees will demand higher wages, which has already started in many companies and will fuel the inflation story.
- The supply chain crisis will continue in 2022, especially if governments persist with more restrictions and lockdowns.
- There are three hotspots (Ukraine/Russia, China/Taiwan and Israel/Iran), and tensions are running high, and I hope diplomacy wins the day. But, if a war broke out, I would not be surprised.
- People are feeling the strain of the 2 year crisis, and I foresee more social unrest..sadly.
- As central bankers attempt to reduce monetary stimulus, and raise interest rates, expect the stock markets to have a temper tantrum at some point.
- Gold and silver had a correction year in 2021 (this is normal and healthy), but as things become riskier in the markets, expect precious metals to have a strong year potentially. Remember, silver is more volatile but has tremendous upside when the bull run resumes. Gold is a pure monetary metal and is more stable and usually leads the charge.
- Many meme crypto’s or projects with no real-world application or adoption will fail in the coming years. Also, thousands of projects that did not ensure the proper legal and regulatory process will end in the trash dump. Regulators will continue to scrutinize the industry as it is becoming more mainstream. Buyers beware!
- There may be a couple of hundred world-class crypto projects, and the rest avoid like a plague. When I consult with clients, I always recommend they do their research before speculating. This market is a very high risk, rapidly changing and volatile. Yes, there are huge potential profits. But, there are also significant losses for those who do not have a plan, leverage, become greedy or lack the discipline to take profits.
- As we end 2021, I encourage you to take some time to evaluate your financial plan and be honest with yourself. What can you do to improve your financial health, what is lacking, and the top two priorities you need to take action on? Do you need to set up saving accounts? Do you have a will? Do you need to look at your spending habits? Do you need to create a budget or start an investment account? Do you have adequate life insurance or critical illness to protect yourself and your loved ones? Is your wealth properly diversified into multiple baskets? Do you have a hedge against all of the current market risks? Do you need to increase your financial education? I encourage you to take my “Wealth Foundations Series” course, as I share the fundamental principles to long-term success: https://fivefoldfinancial.ca/wealth-courses/. An excellent gift for a loved one or yourself. You will make better money/wealth decisions by learning and growing your financial IQ.
My final blog for 2021, and I look forward to reconnecting with you in early 2022. If you need help or a second opinion, please reach out to me via my website: fivefoldfinacial.ca
Again, I wish you and your family a wonderful Christmas and a blessed 2022.
Bill Westmacott, Owner