Conventional wisdom is stay the course and stay invested, but Thierry Tremblay, portfolio manager at Shinder Tremblay Private Wealth, part of iA Private Wealth, rails against this generic default setting. Instead, he believes there is nuance and argues markets have a ways to fall yet and as such is overweight cash. We give Thierry 60 seconds to argue why this is the correct approach.
James: Hello everyone. And welcome to this WP TV special. My name is James Burton, managing editor of Wealth Professional Canada, and today I'm delighted to welcome Thierry Tremblay, portfolio Manager at Shinder Tremblay Private Wealth, part of iA Private Wealth. Thierry, thanks for joining us.
Thierry: Thank you for having me, James.
James: Now. In a recent newsletter to clients, Thierry railed somewhat against the industry's default setting of stay the course and stay invested and other cliches like Buy the Dip. Now there's more nuance to that Thierry argues, and he believes that markets have a ways to fall yet and as such is overweight cash. So in a twist on our new usual videos, we're going to give Thierry one minute to argue why this is the correct approach right now. Thierry, are you ready?
Thierry: I am challenged, but let's do it.
James: All right. Your time starts now.
Thierry: So for one, cash is now an alternative, which hasn't been the case in the past. And we don't believe that investors are really positioned for a protracted bear market. There's a lot of fear missing the upside, but not a lot to the downside, because over the past couple of years, the Fed always came to the rescue whenever the market became wobbly and when it went down. So on top of that, let me just give you some facts that basically portends to a bigger slowdown. 80% of tightening periods in the past led to recessions since the 1950s when inflation is higher than 5%. We had a recession. We now have a deeply inverted yield curve. Money supply is now negative. And that's the first for the let's say, the last 45 years, PMIs are in contraction territory, housing sentiment is tanking and the only bottoms, basically the market bottoms only when the sentiment bottoms, which is historically six months later and P's they're nowhere cheap. They're trading at 17 times now versus nine during the great financial crisis. So volatile tends to rise as we get closer to recession and everything goes down. At the same time, I think we're going to see this. So 2022 is a year of higher rates, which creates shocks, and this year will be the year of low earnings. This cycle needs time and space. Breathe. Be patient.
James: Thanks so much Thierry for joining us on WP TV. That was impressively done. Appreciate your insights.
Thierry: Thank you very much, James.
James: Now to read more about Thierry's position and the investment philosophy, look out for an accompanying article on wealthprofessional.ca and for more information on him and his team, go to shindertremblay.ca. I'm James Burton. Until next time.