We can’t speak for all of Canada, however out in the West Coast we have been experiencing quite the heat wave in the last couple of days. AC units are sold out everywhere and the heat is quite exhausting. As Canada Day weekend approaches, we are saddened by the recent news surrounding the residential schools and need to reflect on our history to realize we need to be better.

Our newsletter will focus on the following topics:

Goldilocks & Inflation
Artificial Intelligence, Ultra-White Paint, and Drones
Eggs, Baskets and Diversification
Client Portal: New Feature
Fleurs de Villes: Vancouver

Goldilocks and Inflation

There have been numerous headlines about inflation lately. Some of this is due to supply chains needing to rapidly adjust to an opening western economy. As an example, production of new cars has been delayed waiting for computer chips. This has caused the demand for used cars to spike upwards, forcing their price to increase (reportedly about 1/3 of the increase in core inflation is due to used cars). Stimulus cheques that have been mailed out in the US are also a large factor in the rapid rise in demand, causing companies to change their forecasts to try and catch production up to demand.

There have also been reports of wage pressures on inflation as companies try to fill job openings. There are likely two components to this, it takes time to go through applications to find the right person and also the lingering concerns for some people over COVID. In the short term, some companies have offered bonuses or are increasing pay. This may dissipate as more people become comfortable returning to work.

When markets are truly concerned about long term inflation, bond yields rise. Instead we have seen yields fall (bond prices have risen) over the last few months, so current expectation is that inflation will not rise to current headline grabbing levels. Inflation may end up being modestly above 2% (whereas before 2020 it had been hovering just below), but if this also results in higher wages, that is supportive of economic growth. This could be the “Goldilocks” solution, not too hot and not too cold where incomes and economies are able to rise in a sustainable manner.

Artificial Intelligence (AI), Ultra-White Paint, and Drones

The pandemic normalized work from home (WFH) and accelerated the adoption of new technologies such as automation, e-commerce platforms, cloud computing, video conferencing and artificial intelligence (AI). In past market recoveries from recessions, we tend to see years of weak productivity growth as companies and governments depress capital spending. However, the opposite appears to be happening and should translate into a meaningful boost for GDP and market growth.

It always amazes us how innovative humans and companies have become to help propel the world into a more efficient landscape.

Source: NVIDIA

Nvidia, a fortune 500 company in the US, specializes in designing graphical processing chips, which are also used for AI research. Their chip technology assisted scientists to predict the 3D protein structure of COVID-19 to accurately detect infection and behavior of the virus. Scientists were then able to run millions of automated experiments to test the efficacy of potential drug candidates. Nvidia’s advancement in AI technology has revolutionized the way vaccines will be created in the future, cutting the time from years to months.

Scientists, at Purdue University, think they have created an ultra-white paint which could negate the use of air conditioning if used on a mass scale. This paint can reflect up to 98% of sunlight, which would help cool buildings and reduce carbon emissions. As you can see from the image: the left side is what the human eye sees, and the right side is a thermo image showing the reflective nature of the paint (black is cold and bright colours are hot). More on this can be found here: https://edition.cnn.com/style/article/ultra-white-paint-scli-intl-scn/index.html?utm_medium=social&utm_content=2021-04-18T03%3A01%3A00&utm_source=twCNN&utm_term=link

In April, a top video streaming app in Shanghai called Bilibili produced a giant Quick Response (QR) Code formed by drones in the sky. For those new to this technology, a QR code is a link that your smartphone can read when a picture is taken, which will then direct you to a website or app.

Hundreds of millions of people in China use QR codes in their everyday lives, often for payment using apps made by tech giants such as Alibaba.

Is this the future of marketing and advertising, time will tell?! More on this story here: https://supchina.com/2021/04/23/the-future-of-advertising-is-here-and-its-a-giant-qr-code-formed-by-drones-flying-over-shanghai/

Eggs, Baskets and Diversification

You are familiar with the old saying, “Don’t put your eggs all in one basket”. We have been hearing about this from some people as they think about their future and thought we would share our perspective on this.

Let us start with the “basket”; in an investment account, the firm (the basket) holds the individual investments in trust for the client. Some people worry that should the firm through which they hold their investments fail, they would lose money. However, rules in Canada protect clients by separating those investments from the firm’s operations, and as such their accounts can simply be moved to another firm. (Note by investments we are excluding bank accounts and GICs, which are used by a bank and are protected, to limits, by the Canadian Deposit Insurance Company.)

The “eggs” in this case, are the investments. Diversification is a key principle in managing an investment portfolio and in reducing risk. Mutual funds and Exchange Traded funds contain a collection of individual investments, whether they be shares of companies or bonds, for this very reason. In larger portfolios, we also include shares of individual companies, but ensure these are not overly concentrated to manage volatility.

The purpose of diversification is to limit potential losses.

If clients have investments at multiple firms, they are likely to duplicate exposure to the same types of investments; holding the same eggs in multiple baskets does not improve diversification. Generally, it is simpler to have all your investments at one place so that it has a unified investment strategy. This is also easier for the investor to monitor. This becomes especially true as we enter retirement and need a strategy to manage income withdrawals and taxes.

Perhaps the saying needs to be updated to “hold many eggs in one basket and watch that basket closely”.

We often explain our investment philosophy and process with a sports analogy. We view the money that we manage for clients as being serious money that must last their life. Thus, our investment style is to hit singles and doubles (investing in companies showing growth and fundamental strength) and avoid striking out (reducing exposure to companies during recessions). If we can do that over long periods of time, client returns will then be very good.

Client Portal: Uploading Documents

On the theme of technology, we thought it would be helpful to let clients know a new feature of the online portal. Documents can now be uploaded in a secure and safe manner without having to email them to us.

Simply click on the documents tab and then the send a document + tab to upload it. This can be helpful if you wanted to send statements, ID’s or a void cheque. We are also able to share documents with you on the same system.

Fleurs de Villes: Vancouver

In Vancouver, we just had a 10 day event around the city from Fleurs de Villes. They travel around the world each month to a different city showcasing top local florists, designers, growers and nurseries. More can be found here: https://www.fleursdevilles.com

Tracy took these pictures around the city, showcasing the artwork:

Conclusion

Hopefully, everyone can enjoy the summer and the back half of 2021. As always, if you have any questions, please feel free to reach out.

Finally, we wanted to thank everyone for the introductions we have been receiving to individuals who are looking for financial advice.

Jack Fournier B.Sc, FMA, CIM®
Portfolio Manager | iA Private Wealth
Insurance Advisor | iA Private Wealth Insurance Agency
700-609 Granville St. Vancouver, BC
p: 604 895 3348
jack@beaconwealthpartners.ca

Travis Kidson, B.Sc, CFP®, CIM®
Portfolio Manager | iA Private Wealth
Insurance Advisor | iA Private Wealth Insurance Agency
700-609 Granville St. Vancouver, BC
p: 604 895 3486
travis@beaconwealthpartners.ca

This information has been prepared by Travis Kidson and Jack Fournier who are Portfolio Managers for iA Private Wealth Inc. and does not necessarily reflect the opinion of iA Private Wealth. The information contained in this newsletter comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors. The Portfolio Managers can open accounts only in the provinces in which they are registered.

iA Private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. iA Private Wealth is a trademark and business name under which iA Private Wealth Inc. operates.

Insurance products are provided through iA Private Wealth Insurance Agency which is a trade name of PPI Management Inc. Only products and services offered through iA Private Wealth Inc. are covered by the Canadian Investors Protection Fund.

Beacon Wealth Partners is a personal trade name of Jack Fournier and Travis Kidson.

2021 Q2 Newsletter