What a difference a year can make!  This time one year ago, we were facing yet another year of negative returns in the stock markets, the third in a row. What’s more, with war looming in Iraq, the outlook for 2003 was pretty bleak. Yet, as time proves again and again, things can change very quickly and most often when you least expect it.

Markets on the rebound

As 2003 draws to a close, all the major North American stock market indices are up year to date by an average of 20 percent or more! The numbers are even more dramatic if you look at just the past eight months since the end of the war in Iraq.  Most of that growth has been driven by the more volatile stocks, the kind you do not want to own. Still, it is clear a significant, sustained change in market sentiment has taken place.

So what gives – enfin? No doubt the relative geopolitical stability we have enjoyed since the war (stress on relative) has played a role. But, the sustained upward trend in stock prices is due primarily to all the good news we are seeing on the economic front.

Both the US and Canadian economies have been gaining momentum since the early part of the year. Lately the pace of growth has really picked-up. The US economy in particular is on a real tear, growing at a rate of just over 7% since July!  It appears that the big cuts in interest rates and income taxes have provided both consumers and business with new incentive to spend.

Here in Canada, the economic situation is somewhat different. We have not benefited from the same level of monetary stimulus as our American neighbors. Our interest rates are higher and tax cuts, as we all know, have not been as generous. We have also had to contend with mad cow disease, SARS, wildfires, power outages, not to mention an unprecedented rise in the value of our currency. Despite all this, our Canadian economy continues to steam ahead, albeit at a more modest pace than south of the border.

Going Forward

All this good news on the economic front bodes well for corporate earnings, and of late earnings have generally met or exceeded expectations.  When corporate profits rise, so do stock market valuations. At least that is the way things are supposed to work. It is reassuring to see a return to some degree of normalcy at this level.

Certainly the overall mood these days is cautiously optimistic. What’s more, the general consensus among economists is that we can expect a relatively prosperous year in 2004, not just in North America, but in Europe and Asia as well – Yeeha!

Values and Priorities

I have to admit that what I appreciate the most about this new up-beat mood in the markets is the opportunity it presents to get back to basics. Over the last several years, I have felt as though I were in constant crisis management.  From market mania to market meltdown, nothing was normal anymore. Although you all weathered these extraordinary events with amazing aplomb, the extended  “crisis” was a huge distraction.

I was recently renovating my web-site (much of the work is done, so please take a look) when I stumbled on a testimonial written by Cynthia Morris, one of the oldest and dearest of clients. She wrote:

…financial planning is about a lot more than interest rates, tax advantages, and amassing sums. Financial planning is about values and priorities, about fleshing out in the material realm what we want to be as people.

I always knew that Cynthia was one smart lady! As I re-read those lines, I realized to what extent I had allowed the events of the past few years to lead me away from my own values and priorities as your financial planner. Thank you Cynthia for reminding me.

So it is back to basics. By that I mean a renewed focus on what really matters in your lives and how you can use the dollars and cents to make appropriate decisions for you and your family. After all, money is not an objective in of itself; it is just a means to achieve our goals. To get the ball rolling, I have decided to conduct a new client survey.  It is something I have been meaning to do for a while and now the time is right. You will be hearing more in the New Year. I do hope you will all be able to take a few minutes to participate.

Thank you!

I have said this many times before, yet I cannot say it enough. You are all so reasonable, kind and appreciative, I feel very fortunate to have the privilege of working with you. What’s more, you continue to sing my praise to everyone you know and without those regular referrals, my business would not be where it is today. So I thank you for that too.

HAPPY  HOLIDAYS !!

Sara Gooderham

December 2003