Next time you call us, please listen carefully as our telephone extensions have changed. The greeting will guide you through the new extensions which are:
If you are calling to book an appointment please press 1 to speak with our new receptionist, Sandrine.
For Mona Press 2 (Mona no longer book the appointments, she now does investment processing)
For Anthony Press 3
For Odette press 4
For Terry Press 5
For Janet Press 6
Pour le service en Français, appuyer sur le zéro pour Sandrine.
Thank you. Looking forward to hearing from you!
In recent weeks, stock markets have declined while investments considered to be “safe havens” have increased in value, including developed market government bonds and the U.S. dollar. Investor concerns have focused on the slow pace of economic growth, particularly in China, Japan and Europe, continued conflict in the Middle East and the winding down of the U.S. Federal Reserve’s economic stimulus plan, which may lead to higher interest rates.
Markets began to turn lower in September, resulting in uneven results for the third quarter. The Canadian dollar and stock market were affected by weakness in the resource sectors, as the price of oil and other commodities dropped in response to downgraded expectations for global growth. After hitting a new high on September 3, the S&P/TSX Composite Index went on to post a modest drop of 0.6% for the quarter.In the U.S., the S&P 500 Index moved above the 2,000 mark before losing momentum and finishing the three-month period with a gain of 1.1% in U.S. dollar terms and 6.2% in Canadian dollars, the difference reflecting the weakness in the Canadian currency. Globally, the MSCI World Index was 2.1% lower in U.S. dollars, but was up 2.8% for the quarter in Canadian dollars.
The Canadian bond market, meanwhile, posted an overall gain of 1.1% during the third quarter, with higher-quality issues such as federal government bonds leading other segments of the market.
However, stock markets continued to lose value in the first two weeks of October, with economic data from Europe one of the factors disappointing investors. While these market movements have resulted in alarming headlines in the business press, I would like to put the numbers in perspective.
Even with the recent declines, the Canadian and U.S. stock markets were still positive for the one-year period (as of October 15), and the S&P 500 was up more than 175% from its low reached during the financial crisis in March 2009. In addition, the broad U.S. stock market had not had a correction, which is a drop of more than 10%, since October 2011. Such a long period of stability is, in fact, highly unusual for stock markets, and we should not be surprised by higher levels of volatility.
While no one can predict how prices will move in the short term, there are a number of circumstances that remain supportive of markets, including low interest rates, strong corporate earnings, and a strengthening North American economy. For example, the U.S. economy grew at an impressive annual rate of 4.6% in the second quarter, and the unemployment rate fell below 6%in September for the first time since July 2008.
I believe the best way to weather market volatility is to take a longer-term view and remain invested in a diversified portfolio tailored to your individual objectives. Diversification by asset class, industry sector and geographic region helps to provide more stable returns, because not all investments respond to events in the same way.
Here is a great article that everyone should read published last week in the Globe & Mail which discuss the subject. Find it here.
If you have any questions about your investments, please do not hesitate to contact me or Anthony at 604-878-0702.
Thank you for your trust and confidence during this period of market uncertainty.
Sources: CI Investments, Bloomberg, Reuters, Globe and Mail, National Post, and Financial Times. Index information was provided by TD Newcrest, PC Bond and Yahoo!Finance.
From the Globe & Mail
16 Oct 2014, The Globe and Mail (BC Edition), TIM KILADZE
Humans love to think of themselves as incredibly logical actors. The truth is, we’re hopelessly irrational animals. Just look at these markets for proof.
In little more than a year, the S&P/TSX composite index soared 30 per cent, propelled by a peculiar case of amnesia. Amid warning signs that the European economy was sputtering and that China’s lending boom had run its course, investors kept piling into Canadian stocks.
The same is true in myriad other markets. Take oil prices, which hung in around $100 (U.S.) a barrel no matter what happened in the Middle East or how many new barrels came onstream in emerging plays such as the Bakken.
Now investors are acting as if the world is imploding, and all it took were some predictions of a market peak.
Here’s some logical advice for everyone who’s panicked: We’ve been here before; we got through it then; we’ll get through it now.
Remember the summer of 2011, when the United States had its debt downgraded and the S&P 500 tumbled 17 per cent in two weeks? How about July, 2012, when Spain’s 10-year bond yields skyrocketed to 7.6 per cent amid fears that countries on the euro zone’s periphery couldn’t control their spending? In every case, investors freaked out. Yet somehow we survived. Above all else, that’s the most important story of this rocky recovery. Our progress can be frustrating, because it often feels like two steps forward, one step back. But we manage to improve. Although there is a lot of noise, unemployment rates in Canada and the United States keep falling.
This is all very normal in the grand scheme of things. Throughout history, full-blown recoveries from horrible financial crises have always taken much longer than expected, according to research in the seminal book This Time Is Different. The last crisis turned ugly in late 2007, and seven years of uncertainty can seem like forever, but history proves otherwise.
If anything, these red alerts can be helpful, because they force craven policy makers to stop caring about political calculations. People typically don’t like tax and fee hikes, but they’ll stomach them if it means the markets will be okay. Funny things, these irrational minds of ours.
To stay focused, remember that we’ve seen this all before. By now the meltdown playbook is pretty obvious. Investors panic and then flock to safe havens such as U.S. Treasuries. As fear spreads, politicians come forward and promise to do whatever it takes to fix the key problems. Eventually investors realize corporate profits haven’t suffered too badly, so they start buying stocks because they need better returns than those offered by the bond market.
The latest correction is ugly, no doubt. It is especially scary because this can feel like uncharted territory. Few fundamental investing theories hold up in this era of rock-bottom interest rates, fuelled by central banks flooding the world with money.
But there is one truth that is universal: Nothing goes up forever. Which is why the market had to correct at some point. Keep that in mind the next time you look at Canadian house prices.
After more than 1000 days without a 10% or greater market correction, it looks like we are headed for one. The S+P500(USA) is down 4.28% as of today Oct 2, 2014 from its peak on Sept 17. The TSX (Canada) is down just over 5% from its peak on Sept 2. We are experiencing a lot of volatility due to the Iraq issues, the protest in China and the Ebola crisis.
When markets have such a run up, a correction is expected. Any kind of uncertainty can quickly spur jitters and this is exactly what we are seeing now.
Should you be concerned? No, you should not be concerned. The indicators do not point to a recession. For reasons outlined in my previous market blog, data shows that we are still in the recovery and early expansion phase, not in the recession or downturn phase.
Take a look at the chart below compiled by IA Clarington from data obtained from Morgan Stanley research, Bloomberg and NBER. Most of the U.S. cycle indicators show that we are in the recovery phase with no indicators in the downturn phase.
What should you do? Sit tight and do nothing. This will pass eventually and we should see the recovery continue. Or, you can exploit this volatility and make an investment if you have the funds available and are in your saving years.
Read our last blog here on What if we are wrong.
Terry and I are heading to a 3 day investment conference where we will be listening to many managers, analysts and economists. Stay tuned for a full report when we return.