Absent the Reasonable Prospect of Recession, the Advice Remains to Stay the Course and Maintain Equity Weightings per Your 'Investment Policy Statement' on File With Myself

Feb 15, 2019 | Nick Scholte


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Trying to time the "downs" and subsequent "up" of shorter-term market corrections means one must be right twice... it is difficult (if not impossible) to do, and generally results in clients being "whipsawed" out of long-term positive returns

To my clients:

It was an up week for North American stock markets with the Canadian TSX finishing up 2.1%; the U.S. Dow Jones Index up 3.3%; and the U.S. S&P 500 up 2.6%.

It’s another very brief update this week as the general, longer-term messaging remains the same, as does the shorter-term messaging pertaining to the recent winter correction in stock markets.

Long-term, absent the reasonable prospect of recession, the advice remains to stay the course and maintain equity (stock) weightings per the Investment Policy Statements on file with myself. Trying to time the “downs” and subsequent “ups” of shorter-term market corrections is difficult (arguably impossible) to do, and generally results in clients being whipsawed out of long-term positive returns. To be successful, one must be right twice, on both the decision to sell and the decision to buy back, and the reality is that even if one’s market analysis is correct as to when to make both the sell and buy back decision (itself near impossible to do), human psychology would likely prevent one from following through on this analytical assessment owing to fear and the inability of most (myself probably included) to be able to flip that mental switch on such short notice.

Regarding the correction itself, the v-shaped recovery continues. I suggested in my past two updates that the recovery was likely to begin to slow and move in a more sideways fashion over the next several weeks absent materially positive developments on the China/U.S. trade front. Well, this week saw more face-to-face meetings between both nations, and the resultant tenor appears positive. I continue to suspect a positive outcome as I believe both sides have material motivation to get a deal done. In any event, the positive tenor of the meetings led to another materially positive week for the markets. See the opening sentence above.

That’s it for this week. All the best,

Nick

Nick Scholte, CIM, FCSI

Vice-President & Portfolio Manager
RBC Dominion Securities Inc. │ Tel: 604.257.7569 │ Fax: 604.235.9950
3200-1055 West Georgia │ Vancouver, BC │ V6E 3P3
Toll Free: 1.844.665.9900 │ nick.scholte@rbc.com

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