Market Commentary - March

Mar 19, 2020 | Brenda Miller


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Good morning,

 

This is a very challenging time for all of us. We are all dealing with health concerns during a global pandemic and we are worried about our families and our friends. In addition to this, we must worry about the markets and our retirement plans.

I have been in this industry for over 25 years. I’ve seen many more up markets then down markets. What causes these market corrections might be different every time but what doesn’t change is client emotions. In the worst of a correction it is quite normal to feel anxiety over the markets. I am confident in my own investments and with the market. I believe that the markets will settle and return to normal at some point.  What does concern me during market turbulence is how you are feeling.

 

My number one responsibility is to make sure I can manage your cash flow regardless of what the markets are doing. For each of you, I am managing your investments to make sure your monthly withdrawals continue uninterrupted. I am comfortable your financial plan has been prepared for this and has always taken market volatility into consideration.  We have bonds and cash for withdrawals that will also allow us to take advantage of buying opportunities in the market.  We will rebalance portfolios back to your targets.

 

When markets are behaving as we are seeing now, it is quite natural to think this is different than anything we’ve ever seen before. Although every market correction has similarities and differences, many things have not changed.

 

What hasn’t changed? What we tell clients hasn’t changed. “Buy low! Sell high! Stay the course, don’t overreact, take advantage of current markets to rebalance your portfolio and think long term”.

 

What has changed?  We are not taking face-to-face client meetings at this time. We want you to remain healthy. We want our staff to remain healthy and available to assist you with all your needs. We are available by phone and email.

 

I have included a story about Warren Buffet.  This was provided to us by RBC Global Asset Management. 

 

Wise words from Warren Buffett

Estimated reading time: 3 minutes

On October 16, 2008, in the midst of the global financial crisis, Warren Buffett penned an op-ed in the New York Times titled – “Buy American. I am.” At the time, U.S. equity markets were down roughly 30% amidst widespread market fear and investors were in dire need of inspiration. Sound familiar?

 

Yesterday, in search of some inspiration of my own, I read Buffett’s article and realized the bulk of what he wrote 12-years ago still applies directly to investors today. With that in mind, I wanted to share a few of my favourite nuggets from the Oracle of Omaha:

 

•    On fear. Fear is now widespread, gripping even seasoned investors. But fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10, and 20 years from now.

•    On where things are headed. I haven’t the faintest idea as to whether stocks will be higher or lower a month, or a year, from now. What is likely however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up.

•    On investor behaviour. In the 20th century… the Dow rose from 66 to 11,497. You might think it would have been impossible for an investor to lose money during a century marked by such an extraordinary gain. But some investors did. The hapless ones bought stocks only when they felt comfort in doing so and then proceeded to sell when the headlines made them queasy.

 

How did things work out for Mr. Buffett?

 

Over the short-term, things didn’t go so well. From the day Buffett announced his intentions to the American public, his purchases would get pummeled. In fact, the S&P 500 would go on to drop another +20% before bottoming. That said, this didn’t cause Buffett to flinch as he knew he couldn’t predict short-term market movements.

 

For many, Buffett’s advice provided the framework required to see across the valley during the worst storm to hit markets since the Great Depression. And, by putting money to work when others were fearful, investors who followed his wisdom are certainly singing his praises today.

 

Source: RBC GAM, Bloomberg, Morningstar. Buffett's cumulative return is S&P 500 TR CAD from October 16, 2008 to March 16, 2020.

 

This is what “buy low, sell high” looks like.

While we are often quick to simplify the key to investment success with the popular adage buy low, sell high – what these words look like in practice is often overlooked. Buying low doesn’t mean investing at the bottom. If it did, we’d all be in trouble. Even the best investor of our generation couldn’t get that right.

 

Rather, in practice, it often plays out as follows. You buy and the market goes down. Then you buy some more and it may go down even further. However, as a long-term investor, your time horizon is sufficient enough that one day, down the road, you’re in position to sell high.

In addition to the information above, RBC Dominion Securities has put together a podcast which would take you about 20 minutes to listen to. 

 

You will find the link below:

Audio commentary: Coronavirus developments and market impact

RBC Wealth Management’s latest thoughts on the unfolding coronavirus outbreak and the investment implications.

As the COVID-19 situation continually evolves, this is a period of great uncertainty for all of us.

To help make sense of these difficult times, we had a conversation with Jim Allworth, RBC Dominion Securities’ Investment Strategist, on the economic impact of the outbreak and what this disruption means for financial markets, what we’re observing during these fast-moving developments, and what to expect from here.

Please take a few moments to listen to this audio file.

If you have any questions or need further guidance, please do not hesitate to contact me.

Past performance is no guarantee of future results.

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