Market Update

2022 has been the year of market volatility and understandably an uncomfortable time for investors. The “statement shock” can be worrying for many people when they see their investments worth less than they were three or six months ago.

Most of my clients are experienced when it comes to the ups and downs, but nevertheless, it is a time of many questions about what you should do when markets are down. Every time it happens it feels like it’s different this time.  The reasons may be different, but the response should be the same. First, I want to summarize the recent events which have contributed to negative returns so far this year.

Pretty well everything is negative year-to-date, even low risk stuff! These negative markets are not because of the underlying stock fundamentals of the companies, as many have reported good or great earnings, and future projection for profits and growth are very positive. It is macro-economic reasons that have rattled stock markets. Inflation and rising interest rates are the biggest contributors to the market whiplash we’ve been experiencing, and the Russia/Ukraine war on top of that has magnified the situation. Investors/overall markets are very emotional, and they react to uncertainty with selling (and buying) without fundamental reasoning, which creates these volatile markets. The good news is that many of our market strategists, portfolio managers, and economists are not of the view that this is going to be long-term, nor does it signal an impending recession. They believe the markets will begin to turn around the other way. It is just a matter of when, and how quickly they rise.

So, what should you do? Well first, keep in mind that when investing, even though it is difficult to do so, it is important not to get spooked by the short-term numbers. These kinds of markets do happen from time to time, and eventually recover. Although uncomfortable, it is very normal. We look at history to guide us through these turbulent periods. Most often, these hard weeks/months are followed by some of the highest gains, so it is best to stay the course, and remain invested.

So long as your time horizon for the investments and your overall plan hasn’t changed, you should be prepared to weather this storm, like others in the past, and see beyond this downturn to the mountain we can likely hope to climb on the other side.

I wanted to share a few quotes from some of the portfolio managers I’ve been hearing speak lately. These are the folks making the investment decisions within the mutual funds you own. These managers make objective, unemotional, professional decisions to help you build wealth every day, even in bad markets.  Their investment decisions are ones backed by a huge amount of research, analysis, and discipline.

“When we feel a loss of control, our natural tendency is to seek safety. Take shelter from the storm. This is what can make investing frustrating. We have no control over the events that cause volatility, which often leads to poor decisions.”

“One of the pillars of the management teams deliberate research-based framework is sentiment, which in practice means taking advantage of market fears rather than indulging them. This is also something that the underlying building block managers do well by looking for buying opportunities when sentiment is overly negative.”

“When the market makes a -10-20% correction like this, what does it look like going forward? Historically, if you look out 12-24 months past these moments in time, recoveries have often been incredibly strong.”

This is not to say that the market can’t go lower from here over the next few weeks or months, but most portfolio managers are looking out 2-5 years from now whereas the market is focused primarily on what is happening today.

In closing, despite macro-economic and geopolitical risks occurring in our world right now, investors should not lose sight of their long-term investment goals. Diversification and professional management can help manage short-term risks while pursuing long-term investment goals. Stay the course, and know that we have been here before, and will be in the future, but over time we are rewarded for our patience.

This article was prepared by Amanda Ashwood who is a mutual fund representative with Investia Financial Services Inc. This is not an official publication of Investia Financial Services Inc. The views (including any recommendations) expressed in this article are those of the author alone, , and are not necessary those of Investia Financial Services Inc.