2022 was a challenging year for most investors in Canada and globally when it comes to performance. This was also true for your Plan with CST. This means you may see your CST Plan values and the illustration of projected values at maturity come down over last year.

 

What has happened?

2022 will stand out in history as among the worst performance years for investment markets, as most investors experienced significant losses to their portfolios.   At CST, we invest in a diversified portfolio that combines equities (stocks), bonds and other asset classes. This approach works well as bond returns tend to help diversify a portfolio with equities – bonds act as shock absorbers, and typically go up in values as stocks decline. 2022 was one of those rare periods in which both bonds and equities experienced sharp losses.

 

Where has this happened?

The market downturn of 2022 happened on a global scale, impacting most markets and asset classes. It has been a tumultuous year, to say the least, and felt in many ways. The events of 2022 really demonstrate just how intertwined global markets are and how events taking place around the world can impact things here at home.

 

Why has this happened?

Inflation, which was largely steady for the past 30 years, exploded in 2022 to levels not seen since the 1970s. As a result, central banks have rapidly increased interest rates, trying to lower demand for goods and services and slow the rate of inflation. Unfortunately, this hurts bond prices.   This, combined with the Russian invasion of Ukraine, persistent Covid-19 impacts in China, trade supply constraints, and more have all combined to cause equities to be sold off and drop in value rapidly.

CST is not immune to fluctuations in the markets. Except for cash and a small number of niche investments, the vast majority of investment funds, asset classes, and general investment products experienced dramatic losses over the year.

 

What should we do?

Stay calm and stay invested. Investing is a long-term journey in which there will be periods of both ups and downs. History has shown that for the vast majority of investors when markets experience a critical event such as what we are currently facing, the investors who stay disciplined, remain invested, and stay calm tend to have better outcomes.   CST’s long-term investment approach is designed for principal1 protection and to earn competitive returns over the life of the Plan.

 

When should things get better? 

We can't know precisely when, but markets tend to recover from such downturns with the passage of time. We have seen these kinds of downturns before; the 2000 Dot Com crash, the 2008 Financial Crisis, and more recently, the 2020 market plunge related to Covid-19 pandemic crisis. AT CST, we stayed true to our investment approach during these times and our investment portfolio recovered from initial losses. We believe this time is no different. The key is to stay invested and focus on the long term.

We expect as inflation eventually subsides and markets normalize, clients who remain invested should benefit from future gains in the markets. History has shown that staying invested ultimately pays off for investors.

 

How do we remain positive?

1. Despite everything that has happened in 2022, take a long-term view of the markets. There will be short-term periods of volatility.
2. Understand that the economies of Canada, the U.S., and many parts of the globe remain strong and fundamentally sound.
3. Recognize that markets will eventually resume their longer-term historical patterns, in which a diversified, well-constructed portfolio will deliver on our investment objectives.