The paradox of investing is that it is very simple yet it is very hard. On the surface, it is simple: all you need to do to make money in the stock market is to buy low and sell high. Unfortunately, (or fortunately, depending on how you look at it) that is where the simplicity ends. Because investor behavior is so inextricably linked to human emotion, investing is very hard for the vast majority of investors. The two main emotions guiding investor behaviour are fear and greed. All successful investors – with no exceptions – recognize both when they see it.
About 20 years ago, I read a book on investing that completely changed how I approach managing money. The book is called “Market Wizards”, written by Jack Schwager. It is a classic investment book that presents in-depth interviews with some of the world’s most successful traders that delved into their mindsets, strategies and risk management principles to try to uncover what separates top investors from the rest. What fascinated me was that every trader had a different approach but they all had one thing in common. They traded in a way that matched their personality. Some traders thought long term in terms of months or years while others could only think short term in some cases in terms of hours or minutes. Some traders focused on macro-economic factors while others ignored them and focused exclusively on individual securities. The main theme was clear after I finished reading the book. I needed to invest according to my personality and doing this significantly improved my performance.
For me, this means that I am incapable of thinking short term and so I focus on the long term. That’s why short-term volatility does not bother me and, in fact, actually makes me happy. And if there is one strength I do have as an investor, it is my ability to know when the market has bottomed. I rarely get flustered by anything I see in the market when it is going down and it has resulted in my being able to take advantage of severe market dislocations in 2008/2009, 2013, 2018, 2020, 2022 and 2025. In each case, I was able to take advantage of market drops that benefitted my clients enormously and all were the result of fear in the market that proved to be short lived.
If you had told me at the end of 2019 that during the next five years we would see a once in a century flu pandemic that would nearly shut down the world economy in 2020, oil prices would temporarily go negative, inflation would rise to 9% in the US and 8% in Canada, interest rates would be hiked as much as 5% by central banks causing the worst bond market performance ever in 2022, Trump would be reelected in 2024 and ignite a trade war in 2025 and the markets in Canada and the US would be up 60% and more than 100% respectively, even I would have had a hard time believing that. And yet, that is what happened.
Needless to say, 2025 has been another eventful year but despite a 20% drawdown in April, we’ll end the year with very healthy double digit returns for 2025. Honestly, I’m not surprised and our Global Investment Strategy Committee is calling for another positive year next year although we will likely not see the robust returns of this year. Among the factors we see are the low probability of a recession in the US, the effect of recent rate cuts taking effect on the economy and the fact that it is an election year in the US which tends to be favourable for fiscal stimulus and therefore stock markets. We think that our rate cuts in Canada are done for now and possibly one more in the US.
While I am ready for any correction when it comes, I am bullish on markets for 2026.
As we approach the holiday season, I wanted to let you know that I will be making a donation to two organizations this year on your behalf: BGC Moncton and Sistema New Brunswick. I have been a regular supporter of both these organizations over the years because they both invest in children which is the best investment we can make in our future.
BGC (Boys and Girls Club) Moncton is well known to everyone, but I would encourage you to visit their website and brush up on the wonderful work they do for children in our community.
Every child and youth has a story | BGC Moncton
You may be less familiar with Sistema New Brunswick but their impact on children in New Brunswick has been nothing short of miraculous. Everyone should know this story and in particular their goal to lift 10,000 children in New Brunswick out of poverty.
Sistema – A Campaign to End Intergenerational Poverty
On behalf of Lyndsay, Mattia and myself, we wish you a very safe and happy holiday. Thank you for your continued trust and confidence.