Investing in volatile markets: An update from your Portfolio Managers

Mar 09, 2020 | Elinesky Schuett Private Wealth Management


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As you are probably aware, stock markets around the world have experienced significant volatility, largely in response to the uncertainty around the coronavirus (COVID-19) outbreak and another unforeseen shock in the form of a global oil price war.

Four business people

Although it’s not always easy, it’s more important than ever that we stick to our long-term investment strategy. We have worked with you to create a financial plan that incorporates times like these, when market volatility can affect your portfolio value.

We have experienced times of volatility like this in the past, and investing in a high-quality portfolio remains key. Our focus has always been on building a portfolio that is made up of high-quality dividend stocks, and the benefit of building this type of portfolio has become even more evident now. By looking at past trends in the market and the various volatility catalysts, we can see that the markets have always recovered, and then gone on to set new highs.

A long-term perspective and staying invested are important to achieving your financial goals.

The news, and likely your dinner table conversations, have been focusing on COVID-19. It only takes a quick glance at today’s papers to see the attention-grabbing headlines, but it’s important to keep perspective. Worldwide, there have been at least 101,583 COVID-19 cases confirmed and 3,460 deaths reported1. This compares to the over 290,000-650,000 flu-related deaths worldwide each year3.

Protecting yourself and slowing the progress of this respiratory illness has also been a very popular topic of conversation lately. The following tips were posted on Canada.ca and detail how you can protect yourself from getting COVID-19. They sound very similar to what you would do during the flu season.

  • Wash your hands often with soap and water for at least 20 seconds;
  • Avoid touching your eyes, nose or mouth with unwashed hands;
  • Avoid close contact with people who are sick;
  • Cough or sneeze into your sleeve and not your hands; and
  • Stay home if you are sick to avoid spreading illness to others.

In terms of your investments, how should you react to the current events?

  1. Stay the course. Stock markets have declined, and it’s understandable to be concerned or even anxious given the situation. But all too often, investors panic as stock markets bottom out and they unfortunately sell high-quality investments, locking in losses that otherwise would have been temporary.

  2. Remember that your investment strategy takes adverse events into account. It’s designed to help you achieve your long-term investment goals, based on your comfort level with risk, and with the full expectation that there will be some unforeseen ups and downs along the way.

  3. Let history be your guide. We’ve experienced market downturns before, and we know that the best way to get through them is by sticking to your investment strategy. After major declines in 1929, 1973/74, 1987, 2001-2002, and 2008-2009, stock markets recovered and then climbed to new highs. In North America, historically stock market declines have always been followed by stock market gains.

  4. Hold onto quality. High-quality stocks are often the leaders when the markets rally. In fact, downturns like this can be an excellent buying opportunity, as many quality stocks can be acquired at a reasonable price.

Consider, would you sell your home because someone on your street had the flu? Would you sell your business because the common cold had resulted in less customers frequenting your location? The answer to both should be ‘no’. We know that cooler heads must prevail and that the economy will continue to move forward, despite the current volatility related to COVID-19.

We want you to know that we are keeping a very close watch on how events are unfolding, and are receiving regular updates about the evolving situation from various research teams at RBC, including our Global Portfolio Advisory Group.

If you are interested in reading up on some of the research, we have posted several interesting articles below:

Although we’ve all heard the adage “It’s about time in the market, not timing the market”, when we see markets reacting as they are currently, we take advantage of the opportunity to purchase high-quality dividend stocks to continuously strengthen the portfolio. If you were waiting for a time to transition from your cash holdings to your investment portfolio, this would be it.

In the meantime, we will remain vigilant. If you have any questions or concerns, please do not hesitate to contact us at 519-822-2024 or elineskyschuett@rbc.com.

Jay Elinesky, Vice-President, Portfolio Manager  

Tom Schuett, Vice-President, Portfolio Manager

Karie Huisman, Associate Investment Advisor

Jennifer Goody-Brown, Associate Investment Advisor

Elinesky Schuett Private Wealth Management | RBC Wealth Management | RBC Dominion Securities Inc. | T. 519-822-2024 I T. 1-844-369-1269| F. 519-822-1982 | 42 Wyndham Street North, 3rd Floor, Guelph, Ontario N1H 4E6 

 

Source:

1: https://www.theglobeandmail.com/world/article-coronavirus-covid19-latest-news-canada-explainer/

2: https://www.cbc.ca/news/health/flu-deaths-us-80000-last-winter-1.4839917

3: https://www.theglobeandmail.com/canada/article-isn-t-the-flu-worse-and-other-coronavirus-questions-answered-by/