Market Update December 2018
When news headlines scream their messages of doom about the markets, it’s challenging even for the most informed of us to stay calm. The media’s job is to win our attention for ratings, bless ‘em, and sensationalism sells.
Do not panic.
There is a bigger story behind those headlines.The drop in the markets is due to investors adjusting to increasing interest rates, the continued trade war talk between the US and China, and a slow down in global economies. If these are the factors causing worry then rest assured the outlook is looking brighter and there is good reason for being cautiously optimistic. The US is suggesting a slower increase in interest rates, the US/China trade war seems to be settling down and it does not look as if we are headed for a recession.
Take a look at this graph below to see what the markets have done from 2009 till now. Note the sharp drops? Note the rise? That’s what we are going for – long-term growth!As you can see, this volatility has continued over the last 10 years.
We saw this market correction coming a couple of months ago which is why we moved profits to cash and fixed income positions at that time. The equity positions continue to have dividends that will be powered by the drop in the markets.
We have managed to exceed the markets because of these reasons :
1. Managing your risk
2. Reviewing your lifestyle objectives at least once a year
3. Asset allocation adjusted accordingly to your risk and market conditions
4. Cash is set aside for your short-term goals
5. Portfolio diversification
6. Dividend and income reinvesting
7. Most importantly, being calm during volatile markets
I know it’s hard but remember sudden shocks like this have happened many times over the years. Panicking and selling when the market drops often leads to missing out on gains from significant market rise. Missing out on just a few of these positive market upswings can be devastating to your investment results.
Please note, the investments in your accounts are not just in the stock markets. They also include bonds that protect you from drops in the market and good quality dividend-paying companies that have a history of increasing payments to you.
The key to investing is having the discipline to stay invested. Continue with your investment strategy that was created for you and remember, we follow a disciplined investment process that has performed well in credit crisis and continues to outperform the market drop today.
I will be meeting with clients for portfolio reviews between January and April and in the meantime, stay calm and enjoy the holiday break.