November 2022 update - CFA update; state of inflation

I am excited and proud to announce that I’ve successfully passed the Level 3 exam of the CFA designation. This has been an arduous process with countless hours of studying and moments of self doubt, but I’m glad I stuck with it. My membership is now pending review before I can officially call myself a CFA Charterholder, but I’m looking forward to further proving my dedication to the field of investments to the benefit of as many people as possible, near and far.


On the economy, inflation in the U.S. has finally come down meaningfully. In October, annual inflation was down to 7.7%. Investors cheered and markets jumped at the news, hoping that the Federal Reserve will slow down interest rate hikes and eventually stop hiking altogether sooner. But that optimism might be misplaced. Over 7% inflation is still painfully high for the economy and for the average American or Canadian. As the President of the San Francisco branch of the Fed said, “…I can’t reiterate enough that one month of positive data on inflation does not a victory make”. So, the Fed will continue hiking until inflation falls more. The Bank of Canada is also being very cautious about early signs of inflation slowing. Governor Tiff Macklem in a recent interview admitted it will be painful process and might even cause a mild recession next year, adding “the unemployment rate is going to go up”. Already there are cracks in the economy: several big companies, including Amazon, Microsoft, and Disney have announced they will do layoffs in the next few months. It is again very hard to be optimistic about market returns, so staying into safety mode is the better option.



Sample portfolio for a Canadian investor

Asset class

ETF ticker

Weight

Canadian stocks

VCN

2.25%

US stocks

VUN

11.25%

Foreign stocks

VIU

9.00%

US corporate bonds

ZSU

0.00%

Canadian corporate bonds

XSH

0.00%

Global high yield bonds

MHYB

0.00%

Emerging markets bonds

ZEF

0.00%

Global real estate

TGRE

2.50%

Canadian mortgage-backed bonds

ZMBS

30.00%

Canadian government bonds

CLF

15.00%

Global government bonds

XGGB

15.00%

Gold

KILO

15.00%



Sample portfolio for a US investor

Asset class

ETF ticker

Weight

US stocks

SCHX

11.25%

Non-US stocks

SCHF

11.25%

US corporate bonds

SPIB

0.00%

Non-US corporate bonds

PICB

0.00%

US high yield bonds

SPHY

0.00%

Non-US high yield bonds

IHY

0.00%

Emerging markets bonds

VWOB

0.00%

Global real estate

REET

2.50%

US mortgage-backed bonds

MBB

30.00%

US government bonds

VGSH

15.00%

Non-US government bonds

BWZ

15.00%

Gold

GLDM

15.00%