“What got us here won’t get us there!” – Marc-Andre Lewis PhD, President and Chief Investment Officer CI GAM
As we approach the end of January, it feels like we’ve had the equivalent number of events to fill a quarter’s worth of reports, if not more! Rob touched on a few in our last communication, and things haven’t slowed down in the least.
We want to share a few highlights from Assante’s recent Wealth Matters webcast. During the event, Gord Gouinlock, SVP of Sales and Wealth Services, interviewed Marc-Andre Lewis, PhD, President and Chief Investment Officer for CI Global Asset Management (CIGAM), as they looked back on 2024 and forward to 2025.
We know that CIGAM has had its tax reporting challenges with the Assante Private Pools, but the investment management side of things has been impressive. CI had 80% of assets outperform its peers in 2024 and received the most Lipper Awards for the second year in a row for quality and risk-adjusted returns. We expect that the tax reporting issues that arose due to improvements in the investment structure will be behind us in 2025.
As they looked back to 2024, Marc-Andre highlighted that all markets saw meaningful returns. The gold bars highlight the 2024 returns, while the blue bars show the historical range of returns for the various asset classes. The only negative was Global Bonds due to currency, not the asset class return.
The three pillars of 2024 returns were:
- Global easing cycle was underway – all central banks cut interest rates. In Canada, we saw rates decline by 1.75%.
- Inflation approached targeted levels – Canada CPI, as of November’s reading, came in at 1.9%, and Core CPI was 2.7%.
- US growth was extremely resilient, with strong GDP growth, a robust labour market, and stock market dominance.
Investors should not expect 2025 to produce similar numbers. This being said, market performance was relatively narrow, with the bulk of the returns coming from a handful of companies. The following chart demonstrates the strength of the Magnificent Seven (Nvidia, Apple, Microsoft, Alphabet, Tesla, Amazon, and Meta) and how they influenced overall returns.
These seven stocks may continue to see positive returns as they play a significant role in the structural changes in technology and artificial intelligence. However, investors should remember that what got us to this point might not be what gets us to the next point or provides an overweight contribution to returns. As Marc-Andre stated, “What got us here won’t likely get us there!”
The Asset class returns chart below demonstrates and supports the likelihood that last year’s best-performing asset class is rarely the following year’s leader.
These seven companies currently make up approximately 35% of the S&P 500. As Canadians, we can remember when Nortel made up almost a third of the TSX, and RIM used to be our darling tech stock. Fundamentals change, competitors take market share, and sentiment can swing wildly – all strong reminders of why we diversify our investment portfolios.
CIGAM employs an actively managed approach to investing. Although passive investing (just buying the market) has served investors well, active management has a strong backdrop for delivering value when market breadth is narrow. Mr. Lewis stated that just because the Mag 7 have had such strong performance does not mean that they won’t continue to have exposure to these stocks, but they will likely have lower weightings.
“It’s not about being all in or all out; it’s about owning in a controlled, disciplined, and repeatable process.”
For 2025, CIGAM lists the following as a few of the key opportunities and risks …
The interview went on to discuss other headline issues, such as Government debt loads, US tariffs and the possibility of retaliatory tariffs, what central banks are likely to do with interest rates in their effort to manage inflation, what the fixed-income markets are offering, and a strong reminder to investors that more money has been lost trying to time the market than riding through the market.
We will discuss these matters in upcoming meetings, but we strongly encourage you to carve out 40 minutes of your weekend to listen to Gord and Marc-Andre’s interview. They do an excellent job of outlining their positions in a very easy-to-follow manner. The link will require you to input your name and email, select that you are a client, type n/a under the advisor code, put “1” under the number of listeners, and type Thomson Financial Partners as the advisor – it’s a little work; but it’s worth it.
Wealth Matters: January 15 2025 Episode
If you have any questions, please do not hesitate to reach out. – ERIC
