We still believe that global equities will provide a positive return in 2022, and thus makes sense to continue to overweight stocks versus bonds. This viewpoint is because we do not believe a bear market is imminent. Bear markets tend to coincide with recessions and given a recession may still be several years away, it still makes sense to favour equities. That said, this current bull market that started in March of 2009 is very long in the tooth and getting closer to its end date. We believe that at some point in the next couple of years, the Fed will recognize that the neutral interest rate is higher than they once thought.
Unfortunately, it may be too late as a wage-price spiral will have already emerged by then. As Central banks realize this, they will become very aggressive with their monetary policy, ultimately leading to a recession. The good news is we believe we're still a couple of years away from that, so we have plenty of time to prepare asset mixes to help dampen the volatility that will invariably ensue.
You may have noticed that we mentioned stocks versus bonds. The sad reality is that most wealth management firms only have these two arrows in their quiver to help navigate their client's asset mixes.
Fortunately, at Kinsted, we have a much broader universe of investment opportunities available to us, allowing us to provide favourable risk adjusted returns for our clients. Many of you have noticed your exposure to public equities decrease over the past year or two. Going forward, you'll see that exposure continue to decrease as we add additional exposure to real assets and private equity – with the intent to lower risk and enhance long-term returns.
That's the power of TRUE portfolio diversification. Diversification into asset classes that most Canadian investors are not getting exposure to and asset classes that offer superior risk adjusted return expectations over the longer term than the public equity markets.
We're thrilled that you've selected Kinsted to be your wealth counsellor and look forward to communicating in person on some of the exciting investments that are currently in the pipeline.