On Monday morning, MacMillan planners had a special meeting. The main takeaways were that this is obviously not a normal crisis. It has important direct potential implications for the Canadian and wider global markets.
However, this is not the time to panic. If we thought our clients needed to do anything, we would have contacted you. History shows that cutting and running after a market setback, even such as this one, is not usually the best strategy. We encourage all our clients to keep calm and carry on!
The market is down…
Although the markets were at all-time highs in February, the markets have dropped significantly. Many things have affected Canadians since then to cause market volatility–Indigenous protests that blocked major railways, the Teck Frontier oilsands mine cancellation, and now the spread of Novel Coronavirus (COVID-19) and concern over a global pandemic. Despite this, share markets were exceptionally resilient, until this weekend.
The market was dealt a further blow when benchmark oil prices tumbled about 25 percent on Monday after the Organization of the Petroleum Exporting Countries failed to agree on production cuts last week. This led Saudi Arabia to slash its crude prices and raise the prospect of substantially higher production levels that keep prices subdued for an extended period.
Nevertheless, it is vital to have perspective on the present volatility
…but it always recovers
Markets rise or fall on any given day. For long term investors, short-term movements have little impact. Reacting impulsively to daily market movements is almost always counterproductive.
In a recent interview with CNBC, the investment oracle Warren Buffet told investors not to buy or sell stocks based on the headlines they are looking at right now, and instead posed the question: “Has the 10-year or 20-year outlook for businesses changed in the last 24 to 48 hours?”
When you look back through the decades, you can see a clear upward trend in major markets. The downturns, although significant at the time, are often short-lived relative to the growth periods.
What matters most is whether you are on track to meet your own long-term goals detailed in your estate plan. Unless you need your money next week, what happens on any day is inconsequential. It is the long-term returns that count.
Top tips for an unpredictable market
Are you still feeling anxious? Here are our top tips to help put the market downturn into perspective:1. Avoid assumptions
Markets are unpredictable and the experts don’t know everything. Economists on the TV will speculate every night about what might happen. No one knows how the markets will react. It is a waste of time to speculate.2. People are still buying
Quitting the market when prices are falling locks in your losses and is like running away from a sale. Although media headlines state “investors are dumping stocks”, someone is buying them too. They are long-term investors, like Warren Buffet.3. Use the power of the Insurance Act
By investing via the Insurance Act, investments are principal guaranteed, thus withstanding short to medium term falls, while benefiting from market upturns when you can lock in new values.4. Moderation is the best policy
A shrewd investor doesn’t overspend during booms and stays optimistic during busts. Piling on risk when prices are high may leave you open to a correction, just as getting rid of risk when prices are low may mean you miss your turn when things improve. As they say, moderation is often the best policy.5. Discipline is rewarded
Through discipline, guaranteeing a portion of your investments via the Insurance Act, keeping focused on progress to your goals and accepting how markets work, the ride can be bearable. At some point, values are regained. And those who did not act on their emotions are rewarded.
These tips should provide a timely reminder that principal guaranteed long-term investment strategies combined with not impulsively reacting to daily market movements, will provide you with the greatest chance of achieving your goals, and safeguarding your significance.
If you would like to discuss your personal situation, please call the office at 403-266-6464 to speak with your planner.
For deeper information on the economic outlook please visit https://ia.ca/economic-publications/posts by Industrial Alliance’s Chief Economist, Clement Gagnac and his team.