What to expect from your portfolio.
Although stock market directions in the short term are difficult to predict, today's commentary by our technical analyst makes a lot of sense to me. If you read the attached, he is suggesting that we could be in for a period (6 months to a year) where the stock markets could stay relatively flat. This is what we in our industry call a period of consolidation - a period that occurs after a significant run up in stock markets. It is where the market goes up and down within a range but basically goes sideways.
Based on historical data, I think this is a likely scenario for the next bit and we should expect and plan for just that... more volatility with less returns. I know this news might seem unlike me, a little on the pessimistic side but these types of periods are just a normal part of a long term market cycle.
It is also a very good time for active money managers (like the ones you employ) as they can take advantage of the stock price inefficiencies (larger price swings) that come from these types of periods.
The global economies are as healthy as they have been for the last 10 years and earnings from companies look poised to grow at an above average pace. All that said I am suggesting that the stock market looks to have gotten a little ahead of itself and simply needs a little time to let the earnings catch up.
So now that I’ve taken a position, the market will probably go up 2000 points! You can be sure that if that’s the case, I will be as happy as you. But that said, after 25 years in this business I think we should get our expectations in line for a little more volatility and smaller returns, at least for a while.
These types of periods are necessary for us in order to generate good long term investment returns. As always, we will keep you informed on an ongoing basis as the market conditions are ever changing.
We will see you soon to review your accounts as they relate to your long term goals. It is always most important to keep our/your eyes on the most important thing which is helping you achieve those long term goals.
Call or email if you have any questions.
Thanks for your continued business and trust,
Talk soon.
Allan