In the advisory practice that I lead one of the essential steps in my process when discussing the investment portfolio is what's known in the industry as 'asset allocation'. It is the mix between stocks and bonds (or cash) that dictates the majority of your investment experience over time. Getting that aspect right combines innumerable inputs. The quality of the bonds, (as I mentioned in my earlier blog post) as well as integrating responsible investments (that do not include oil companies) are two of several dominant themes in client conversations over recent years.

 

With the OPEC cartel unable to come to a supply cut agreement at their Vienna meeting last week, and the current geopolitical disarray that dominates airwaves, coronavirus is yet another challenge already unsteady economies need to deal with. The effect that weakening on the demand side for oil (with global economies, including travel, at a standstill) as well as a simultaneous flooding of the market from the supply side will be profound. Consider the effect that has on currencies linked to the price of oil... like the strength of the Canadian dollar. Now think about the effect that will have on the balance sheets of oil producers already awash in debt. If that debt is buried in the balance sheet of the energy stocks in your typical 'balanced fund' or low cost, passively managed exchange traded-fund, it will show itself in the share price. Analyzing your current holdings is part of my consultation.

 

This is just one example of the knock-on effect that one event can have on another, as well as how a global pandemic at the same time can wreak havoc for markets. The coronavirus, or COVID-19, could have happened simultaneously with March 2009, eleven years ago when global markets we at their collective lowest levels in decades. But instead, it has spread during a time when markets were at an all-time high, exposing an entirely new generation of investors to corrections and downturns. 

 

Consider that you are 11 or 12 years older, with a retirement plan closer to being converted, an asset mix that doesn't fit your current situation or hasn't been explained effectively. In the renewed market volatility, with the simultaneous effect of multiple geopolitical, biological, and climatic disruptions occurring, you cannot afford not to consider a second opinion.

 

In times like these, you see the value of real advice.