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2022 Fall Market Update

I hope all of you are enjoying this warm fall weather. Last few weeks, I have been attending several conferences and manager meetings on your behalf. Here is a picture from our Keybase conference (so you can see the depth of a team behind Maria and me), plus a few summary points so you can get a sense as to what to expect for the remainder of 2022 and early 2023.

Manager Market Comments:

From Mark Schmehl, Portfolio Manager at Fidelity Investments:

Let’s do a recap, what has been happening in the stock market over the past two years? • You need to frame it in the context of the inflation story - I think energy has peaked, and I think inflation and rates are peaking now. There’s an opportunity here. There are pockets of opportunity now.

• If you think inflation has peaked - we now wonder what happens to the economy. In some sectors, you don’t need to know. Some stocks have fallen so much that if you buy them now and ignore them, you will make money.

Is this a good time to look at the stock market? • You’re not going to have the same bull market as you’ve had over the past 15 years. Scarcity is a theme. At the same time, a lot of innovation people invested in is still there - it got mispriced, and you can still invest against those dynamic themes.

• The dot com bust - some of these growth names you will want to own! Those themes aren’t going away. Tesla, for example, will grow for the next 10 years; they have the best electric car - people aren’t going to stop buying electric cars. We are going to use tons of software, biotech - all the things will be the same; it’s just the price we pay.

Opportunities in Canada?

• Best market in the world - the answer is yes. Energy and resources are great. There are a lot of good companies in Canada. Expensive at the moment - Dollarama - it is more expensive than almost anything, like Costco. There are so few relative others, they are well known.

Final thoughts? • Stylistically been a painful 18 months. I am down 25-30% - I think that we can finally start getting constructive on the market. There is value appearing in pockets of the market. The worst is behind us in terms of a big drawdown - time to start adding risk to the portfolio.

From Dan Dupont, Portfolio Manager, Fidelity Investments

What is your market outlook?

• IG bonds are yielding over 7%. I am a naturally bearish person. I try to buy things when they are cheap. • CPI - it is basically how much it costs for 40% of the population to live. The top 60 are unbelievably different. People who have money are travelling and spending money on airfare and cruises, slowly decreasing in the wealth they accrued.

• In Canada, mortgage delinquencies spike, credit losses are high, and chances of recession increase. 2025 is the bottom - we are at 0.1 mortgage delinquencies in Canada. The mortgage market is so far from being stressed. Maybe house prices need to come down. We get back to a point where it is more typical. Pre-2006, house prices in Canada when were expensive. You can easily make a case for house prices to go down by half.

• That is what we have to go through - the process has started for asset prices to come back to normality. Utilities were priced in much lower interest rates.

From Hugo Lavallée, Portfolio Manager, Fidelity Investments

What are your thoughts on this market?

• It has been a frustrating market. I finally saw the light. The more we go down, the more things are coming my way. Keep your eyes on the prize. All the hard work we are doing right now eventually pays off.

Our bottom line, we must continue to focus on the plan we put in place. We have different asset classes and structures for this reason (markets pulling back).

I have been working hard to ensure the managers we are working with are positioning your portfolios accordingly and will continue to do that. It is often best to review your investments and for me to be able to provide you with the context in terms of your particular situation.

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