Market Update

We recently attended our national investment conference and met with various investment & market strategists, and some of your Portfolio Managers. There was much talk around the recent market sell-off that we have seen over the past couple of weeks, so we thought this a good time to share a summary of what has been happening, and the feelings moving forward.

The recent sell-offs are thought to be linked to the Federal Reserve (Fed) hiking interest rates, which in-turn negatively affected the bond market. This causes uncertainty and emotions have been running high in day-to-day stock traders who think there is some impending doom. Technology stocks have also seen a decline because of these emotional responses. If you consider some of these large tech companies that were included in the sell-off; Apple, Facebook, Amazon to name a few; these companies are still strong and turning huge profits. The stock market reacts to noise, even if the noise is uncorrelated to the strength of a company/stock. Emotions control the stock market on a day-to-day basis.

Your portfolio managers who make the decisions on what to buy & sell and when, are totally removed from this kind of emotion. They make decisions on the in-depth research and analysis into the companies they own or want to own. They take these sell-offs as opportunities to buy more of their favourite stocks for less, or reposition some of their other strategies, including hedging currencies and adding in options where appropriate.

Over the past 10 years, we have seen the second longest economic expansion in history, which has translated into amazing returns and growth in stock markets. To cool things down so that inflation doesn’t get out of control, the Fed is expected to continue to raise interest rates. Most of the professionals we have spoken to are expecting more volatility in stock markets as rates rise, and at some point we will see a larger correction. These sell-offs are just normal bumps in the road throughout the market cycle.

Of course, we position our client’s portfolios according to their needs and tolerances. Most of our retirees who rely on their investments as income to live, need not lose sleep over an impending correction as their portfolios have been structured with a sleeve of safety. Our younger investors or more tolerant growth investors will ride the waves down, and then, as history shows, back up over the mid-long term. Remember, when the eventual correction occurs, that is the best time to buy more!

If you have any questions about how your portfolio is structured, or want to review your situation, we encourage you to come in for a mid-annual review. If you are not currently working with our team, and perhaps questioning whether your current portfolio needs a second opinion, we would be happy to meet you.