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City investments dropped nearly $5M during this year’s first quarter

There was $79,923,836.46 in the long-term portfolio and $29,485,162.61 in the moderate-term portfolio as of March 31, for a total of $109,408,999.07.
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Money featuring former prime minister Sir Robert Borden. File photo

The City of Moose Jaw’s investment portfolios lost nearly $5 million during the first quarter of this year due to — among other things — jittery stock markets, the war in Ukraine and increasing inflation.

During city council’s May 24 regular meeting, council received the investment committee’s report with results from the first quarter of 2022. Council then voted unanimously to receive and file the document.

There was $79,923,836.46 in the long-term portfolio and $29,485,162.61 in the moderate-term portfolio as of March 31, for a total of $109,408,999.07, the report showed. In comparison, as of Dec. 31, 2021, those values were $83,929,536.26, $30,245,558.98, and $114,175,095.24, respectively.

Long-term portfolio

From Jan. 1 to March 31, the long-term portfolio decreased by 4.77 per cent and lost $4,005,699.80. This dropped the portfolio to $79,923,836.46 from $83,929,536.26. 

Moderate-term portfolio

From Jan. 1 to March 31, the moderate-term portfolio decreased by 2.51 per cent and lost $760,396.37. This dropped the portfolio to $29,485,162.61 from $30,245,558.98.

Combined, both portfolios lost $4,766,096.17 during the first quarter, equal to 15.3 percentage points in municipal taxation. 

Since the inception of these portfolios in 2019, they have provided total returns of $18,484,248.18. 

Portfolio changes

During the investment committee’s meeting, it made two changes to how money from the long-term portfolio is invested.

Mayor Clive Tolley moved that $2.71 million from that portfolio be invested in the City of Moose Jaw’s operating account; that motion was approved.

Tolley also moved that the municipality establish a $2-million position into iShares Global Quality Dividend over time; that motion was approved.

Future outlook

Russia’s invasion of Ukraine could lead to a drawn-out period of uncertainty, with the invasion devastating the latter’s economy and harsh sanctions that limit the flow of money, goods and technology affecting the former’s economy, portfolio manager RBC Dominion Securities said in its report.

Due to this war, the financial institution projected a reduction of 0.7 per cent in the eurozone’s GDP growth this year to three per cent and a decrease of 0.3 per cent in the U.S.’s GDP growth to 3.1 per cent. 

“From a long-term perspective, the Russian-Ukraine war brings a range of potential implications, including a new Cold War, increased military spending, nuclear proliferation and a heightened motivation to shift energy supplies toward renewables,” RBC added.

Meanwhile, economic recovery worldwide is slowing because of the pandemic, tightening financial conditions, slowing Chinese growth, reduced U.S. spending and elevated inflation levels, the report said.

Global growth will likely decelerate to 3.6 per cent this year compared to 6.2 per cent last year. Developed-world growth will fall to three per cent from 5.1 per cent, while growth in emerging markets will slow to 4.1 per cent from 7.3 per cent last year. 

RBC predicted that the damage from sanctions against Russia will be unclear, which means the risk for a recession in the United States this year is higher than ever.

Inflation is also punching the United States — and the world — in the gut and running at the highest levels seen in decades, RBC said. The main drivers are surging commodity prices, supply-chain problems, stimulative central banks, labour shortages and a worldwide housing boom. 

“We continue to believe that inflation will, over a longer-term horizon, eventually fully revert to normal, with aging populations and slower population growth even bringing inflation down below historical norms,” the company added.

RBC added that the Russia-Ukraine war would alter the currency landscape, central banks will respond to inflationary pressures, the long-term direction for bond yields will remain up, stocks will have better return potential if earnings come through and re-deploying cash to bonds and stocks will be more attractive.

The next regular council meeting is Monday, June 13.