Yesterday was an interesting day on the markets and it looks like it may continue today. Undoubtedly, you have heard or seen some headlines or taglines with big words and scary predictions. We are just waiting to see the picture of the Wall Street trader with a look of shock, faced buried in his hands, and paper scraps strewn all over the trading floor. That’s a staple of the media and usually a good contrarian indicator.

The Dow Jones has had just about a 9% correction since its all-time intraday high on January 26. The TSX hasn’t seen the same correction. These are big numbers and we recognize that numbers like this grab headlines, but we should look at the context. The US and Canadian economies are strong, jobs are at an all-time high, and unemployment is at all-time lows. A long term bear market does not usually materialize unless we have a recession. At the moment almost every indicator is pointing to expansion, not a recession. All of this volatility has brought the markets back to where they were trading in December. Yes, a month and half ago. That is all. It’s just been so long since we’ve had high levels of volatility or a few large negative days we have all become accustomed to calm and rising markets. This is reality and we’ve been preparing client portfolios for events like this. 

We have been raising cash levels since early fall and moving funds out of the North American markets into different regions around the world. We will continue to do so and if this current “correction” continues we will look at our shopping list and add good quality companies to our portfolios.

So the bottom line is that we are not concerned as these swings are a normal and healthy gyration and our high cash balances will enable us to take advantage of these blips on the long term radar.  Better a correction now than a bear market later.

Here’s a quote to help you remember the above. “Corrections are like vegetables. They don't always taste good, but they can be good for you.”

As always please call or send the team a quick email here if you have any questions or would like to discuss further.