A Step-by-Step Guide to Staying the Course and Market Update
For many people, the last 6 months has been painful. No one likes to see the value of their accounts go down. In a fluctuating market, a combination of discipline and perspective is key to reaching your goals. We believe that “staying the course” is the right approach. If you catch yourself getting down about the state of the market or trying to predict what’s next, keep this guide in mind:
1. Stay calm. No doubt seeing losses on your statement is painful. Ask yourself this: "Given where I am now, what actions move me closer to my long-term goals?" "Would an investment change align with my current investment plan and goals?" Many investors have poor investment performance because they sell low and buy high. Emotional reactions to market volatility can induce a person to act rashly and make things worse in the long run.
2. Ask yourself if anything has fundamentally changed since setting the original strategy. If nothing has changed financially in your life, or personally that impacts your emotional tolerance for risk, then nothing should change with your asset allocation. Rather than selling, adding to your investments on a monthly basis is a better strategy to reach your goals. Buy low!
3. Call us when you have questions. As professional advisors, we spend a lot of time on research and analysis of the investments we have chosen for you. Our investing principles don’t sway when the market lurches. In this sense, staying the course is not idle or passive, but rather about staying aware and thinking long-term about your goals and the strategies we have in place to reach those goals. Investing, like many things, often involves taking the thorns with the roses: There is no reward without risk. Decades of evidence clearly favours time in the market over timing the market.
Pulse on the Market
In our last few updates, we have touched on some of the headwinds the market has faced particularly over the first half of 2022; inflation, Covid and the war in Ukraine. All of those are still relevant, but the work of central banks to bring inflation under control, and the economic repercussions of this, have taken center stage. Many economists, who were not forecasting a recession earlier this year, now expect that we are currently in a technical recession, although there are still mixed signals. The questions are now on how soft a landing the central bankers can accomplish as they continue to raise interest rates to bring inflation backdown. We did enjoy an August rally when inflation appeared to have peaked, but some firm words from US Fed Chair Jerome Powell at the Jackson Hole Economic Symposium has readjusted market expectations. Further lockdowns in China have also contributed to ongoing supply chain worries, and the war in the Ukraine continues to have an impact on energy prices in Europe in particular. Expected interest rate increases have been priced into the market, and the central banks are being crystal clear on their intentions, so the markets are not surprised. We believe that decisions on the size of future rate hikes will continue to be data driven, and, after the initial large increases designed to shock the economy, will become more moderate and spaced out. While we do think that we have started to recover from the lows seen in July, we recognize that the path upward will not be a smooth one, and we will see elevated volatility for some time. A well-constructed, diversified portfolio remains the best defense against volatile markets.
We’re here for you
Please give us a call anytime you are feeling uncertain. We can provide guidance to give you greater peace-of-mind on staying the course, without getting distracted by short-term volatility.
Source:Morningstar Managed Portfolios
This information has been prepared by Jessica Mann, Wealth Advisor and Andrea Looker, Associate Investment Advisor for iA Private Wealth Inc. and does not necessarily reflect the opinion of iA Private Wealth. The information contained in this email comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors. The Investment Advisor can open accounts only in the provinces in which they are registered.
iA Private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. iA Private Wealth is a trademark and business name under which iA Private Wealth Inc. operates.
