By Scott Blair
Short answer is no but perspective is everything. Let’s have a look at one of our actual clients and this person is representative of every investor, give or take.
Three years ago, May of 2019, the sum of all accounts was $336,361. The value of those same accounts today, May of 2022 is $431,048. That’s a difference of 28%. That seems pretty good.
The last few months however have indeed been a bit rough, right up to this month where we have seen a pretty nasty correction. Many markets are down double digits on the year. There are a host of reasons: rising interest rates, high inflation, a war in Ukraine, China’s virtual COVID shutdown, and the list goes on.
Will we get through this without a full blown recession? In our opinion, yes. From an economic signal perspective, while we have seen one or two signals trigger, others are still strongly positive (housing starts, labour market). Companies are still making money and in some ways, making more money. Consider mining companies, up 50% so far this year or even something as boring as agriculture supply companies up 10%. We all hate that the cost of groceries and gas has gone up but over time those costs will revert as supply improves and the demand decreases. The old expression is still valid “The solution to high prices, is high prices”. People just stop spending.
In our view, a bigger and less obvious threat is the rise in interest rates. Higher interest rates and bond yields erode value in bonds and bond funds. The stock markets will absorb this correction, but the future of bonds, deemed to be the “safe” asset class is less certain. That is why we remain overweight in equities versus bonds, and why we are looking at bond alternatives like GICs.
Times like these are great reminders for everyone to make sure they fully understand and are comfortable with the risk in their portfolios. Talk to us if you are not comfortable; we may recommend many changes at this time, but we can adjust as markets improve. Our team is here to make sure you have a plan and that you are sticking with it. We may see volatility with us for a while. But remember volatility can equal opportunity and shouldn't be ignored.
If you would like to talk about any of the points above, or get more clarity please don’t hesitate to call. That’s what we’re here for.