After the market volatility of most of 2022, the 2023 year kicked off with some positive swings in markets. Many funds are nicely positive year-to-date. However, ongoing news of inflation and rate hikes are still making investors nervous, causing continued ups and downs. Cap that off with the recent US regional banks upset, and memories of 2008 are stirring up more emotions.
The good news is that none of the strategists or portfolio managers who I have heard speak recently feel these events indicate a re-do of 2008. The issue with a couple of these small regional banks is not likely to systemically run through the whole banking system and cause a collapse. The larger US banks (which hold the vast majority of the market share), as well as the Canadian banking structure has been and continues to be stable.
Many of our portfolio managers entered 2023 with a level of cash in their funds. As always, these managers know that uncertainty and volatility are often necessary conditions to create compelling investment opportunities. Fear and uncertainty are elevated, and the market is painting many financial businesses (not just banks) with the same broad brush. Taking the emotions out of it, our managers remain well positioned to take advantage of market dislocations and are watching for opportunities to add high-quality, stable businesses to their portfolios at discounted prices.
Warren Buffett famously said “be fearful when others are greedy, and greedy when others are fearful.” Many professional money managers share this sentiment. Market volatility does not scare them; they simply seek opportunities amidst other’s fear.
Your portfolio should reflect your risk tolerance and your long-term retirement planning strategy, as well as short-term liquidity needs. As always, it’s important not to get spooked by short-term ups and downs and stick to your long-term strategy.