You’ve probably seen the news of a drop in the stock market that started on Thursday last week and is continuing today (Monday).
We've been positioning for this kind of correction for some time to minimize the impact these wild moves may have on our client wealth plans.
Our firms' "safe" component provides stable yields over 6% per year (Private Debt fund). And in the short term (weeks to months), equity markets will continue to be volatile; we are mitigating risks to our clients' wealth by actively managing the growth component to take advantage of these market moves.
It's not all bad news – our dollar actually got a little stronger against the U.S. dollar, for instance – but stocks have dipped across many sectors, resulting in a 2.5% dip in the S&P/TSX Composite Index on Friday alone. As Canadian markets are closed today, we'll have to wait and see what happens tomorrow. Last week in the U.S., the sectors hardest hit were energy, technology (of course), and finance-related investments. This was the sharpest two-day slide we’ve seen from the markets in some time, today notwithstanding. It’s unfair to blame the dip entirely on the U.S., as markets globally are down, but it’s likely that the lackluster jobs report from our neighbors to the south is spurring some panicked selling.
It's never fun to see this kind of volatility, especially after the years of struggle we’ve experienced recovering from the pandemic and its aftermath. And, as a portfolio manager, I also prefer to see news about the markets slowly but steadily climbing! I think, however, it’s important to keep a couple of things in mind. First and foremost, while this is a sudden and notable downturn, it’s coming after a sustained rally in the markets. Sharp reversals like this are fairly normal, and they don’t necessarily indicate a cause to worry for long-term performance. Second, though several industries and equity markets are involved in the dip, not all will be hit as much as others. This is why diversification in portfolios is so important, so that when one market has a bad day, ones' entire portfolio isn’t affected.
Questions or comments about the markets? Share with us or contact me.
