The large amount of potentially market-moving news that we have been seeing over the past several weeks and months may have many investors expecting an imminent recession or a major sell off. Both are possibilities, however many experienced and financially savvy investment professionals will tell you that this is expected, especially during the fall season – and especially this month.  October is notorious for volatile and stormy markets. However as with every storm, this storm called the ‘October Effect’, shall too pass. We see similar sell offs year after year, and then immediate impressive gains, during normal markets.

Having said that, the recession risks are more elevated than they were six or even three months ago.  The best course of action given these circumstances is to keep our current asset allocations in our portfolios, invest in high quality securities, and stay focused on the economic indicators. Our portfolio and investment managers and analysts are doing just that. They are cutting out the noise and political drama, and focusing on the data. This is not the first time that we have had political drama which has affected capital markets in the short term, i.e. Clinton Lewinski, Nixon’s Watergate … and now the Trump saga. 

The bottom line is that we are cautious but comfortable. As long as the trajectories of the global and domestic economies and corporate earnings remain at least in slow-growth modes rather than flash red recession warnings, we are comfortable holding high quality equities in portfolios at current market levels.

To read more about RBC Wealth Management’s market and economic outlook, click here.