By Scott Blair & Zoe Adrian
Today let’s just jump right in:
- These are trying times
- Markets are volatile
- Highest inflation in 40 years
- Higher interest rates are coming
You have read all of these by now. It is certainly a time for calm and not panic. The sky is not falling. It is painful to watch the monthly statement take a turn, but in perspective, it is the first time in almost 10 years. We have been lulled into the thought that markets go up, always, without a correction. We forget.
Here is an interesting chart. It shows Bull and Bear markets since the 1930s. The substance of it is bull markets go way higher and last way longer than bear markets. This latest pullback is a disappointment but not the start of Armageddon.
“What we’re seeing is a weeding out of investors that were flushed with liquidity. They bought first and asked questions with meme stocks, SPACs, NFTs, there was a lot of what I call indiscriminate buying. And now we’re seeing some indiscriminate selling,” - Leo Grohowski, Chief Investment Officer at BNY Mellon Wealth Management.
Not that this activity directs the market but because of social media and the velocity of information (or disinformation) it creates fear and anxiety which is unnecessary.
The 14 bull markets since 1932 have returned 175% on average, while the 14 bear markets starting in 1929 have resulted in an average loss of 39%, according to S&P Dow Jones Indices data.
We are now in a correction, meaning less than a 20% drop. Not a recession. These are very recoverable, as always. Recessions are also recoverable; it just takes a bit longer. You can also see from the previous chart, the probability of good returns a year from now is high.
Our message at this point is to simply stay the course. Downturns are unpleasant, we know, but if you are not there for the inevitable rebound, you can’t participate. The one change we are actively making is still to move away from bond funds. (Bonds go down as interest rates increase). Options include GICs, whose rates have increased quite a bit, high interest funds, or possibly adding to equities for those with higher risk tolerances.
In the meantime, if you are uncomfortable with your positions or your portfolio, please let us know, we can help.
One final note, we have all put a shoulder to the grindstone and set our sights on a certain goal. Let’s use high school as the example. If you were in grade 11 and failed a couple of courses and said “forget it, I’m out, it’s futile”. You wouldn’t be where you are today. You wouldn’t have succeeded. Ultimate success comes at a price and sometimes it takes resolve and perseverance to succeed. This is indeed one of those times and persistence pays off.