LOM 2023 Annual Report - Report - Page 9
LOM
2021 ANNUAL REPORT
However, the deflationary forces of globalization that have
supported very low interest rates for the last thirty years are
most probably at an end for the foreseeable future. There is a
renewed focus on the jurisdictional security of manufacturing
supply lines and energy production due to raised political
risks around the world and this will result in somewhat higher
underlying inflation levels and nominal interest rates going
forward.
2021 saw very good returns for all the main world equity
markets, gains made on the back of negative real interest rates,
large fiscal stimuli, and the world’s major economies opening
after the covid-induced lockdown.
The U.S. market as measured by the S&P 500 rose 26.9%
in 2021, the Canadian market as measured by the TSX rose
21.7%, Europe as measured by the Euro 50 index by 21%, the
UK as measured by the FTSE100 by 14.3%, and the Japanese
market as measured by the Nikkei 225 by 4.9%. The Chinese
market declined 4.9% over the year, as measured by the
CS300.
Super-returns like those seen over 2021 are not normal, and
the very factors - negative real interest rates, massive fiscal
stimulus and large pent-up demand by consumers - that drove
the markets to such strong returns, were the seeds of the bear
market that 2022 has brought us. The demand shock to the
world economy, in an environment where supply bottlenecks
due to Covid are still in existence, along with dislocations
caused by the Ukraine war and the Chinese lockdowns,
have created inflation across the world. Central banks have
been left with no choice but to indicate they plan to aggressively
raise interest rates in order to slow economies and rein
in inflation. Rate rises as a response to a cyclical boom is
something the markets would be reasonably comfortable
in discounting, however the elephant in the room for all the
markets is the presence of the massive holdings of fixed income
securities held by all central banks, as a result of their activities
in quantitative easing over the last 15 years. As well as raising
interest rates, they are beginning to reverse that quantitative
easing by allowing their purchases of fixed income securities
to decline. The markets do not have confidence in the world
central banks’ ability to engineer a soft landing for the global
economy in this environment. As a result, we expect that equity
markets will continue to remain very volatile and under some
pressure for the rest of this first half of the year.
There will be greater clarity on the direction of inflation
pressures, and hence central bank intentions, for the markets
to stage a recovery in the second half of the year.
Within this report you will find a table outlining our financial
metrics, in addition to our audited financials, and a report on
our environmental support efforts.
As always, I would like to express gratitude to our clients, our
staff and everyone who works together to deliver the extremely
high service that is the hallmark of LOM.
Kind regards,
Scott Lines
Chairman & CEO
Shareholder’s 5 Year Equity Growth (in Millions)
09
