Taking the bad with the good

October 02, 2015 | Dian Chaaban


Share

While it’s easy to say that being a good investor involves turning off the noise and focusing on the long term, it’s been understandably hard to ignore the headlines this past summer. So, after a messy summer, we’re gearing up for the year ahead by taking a cautiously optimistic look at the bad with the good.

Bad News: The S&P/TSX composite index (excluding energy stocks) is now trading at a price-to-earnings ratio below its long-run average after its third-quarter decline put the index down ~ 9%.

 

Good News: Canada should increasingly benefit from a strong U.S. economy in the next year, bolstering the earnings of TSX-listed companies. There were also a few encouraging data points for Canada this week, including better-than-expected GDP data for August. The World Economic Forum also ranked Canada’s banks as the world’s soundest for the eighth year in a row.

 

Bad News: US Payrolls rose less than projected in September, wages stagnated and the jobless rate was unchanged as people left the workforce, signaling the global slowdown and financial-market turmoil are rippling through the world’s largest economy. The weak report vindicates the Federal Reserve’s decision to delay an interest-rate increase last month. Cooling overseas markets, a stronger dollar and lower oil prices that are hampering exports and manufacturing raise the risk that employers will hesitate before taking on more staff.

 

Good News: The recent swoon in equities has many wondering if this is just the start. But we see no alarms flashing for the U.S. economy. In fact, it may gather steam. We think the pieces are in place for the long-term uptrend to reassert itself in the months ahead. Click here for our latest Global Insight Monthly to read further about our views on the economy.

 

More Good News: Stock market volatility is a normal part of investing. But what you do – and don’t do – during times of higher volatility can make the difference between success and failure as an investor. Click here for a quick read that outlines 10 principles that can help you manage volatility and achieve your long term investment goals. In brief, they are:

 

1. Stay Calm and Invest On
2. Avoid Market Timing
3. Maintain Your Sense of Perspective
4. Reassess Your Comfort Level with Risk
5. Stay Diversified
6. Look for Opportunities
7. Regularly Rebalance
8. Stay Focused on the Long Term
9. Put Time on Your Side
10. Review Your Portfolio