Now What?

Oct 29, 2018 | Sam Rook


Market volatility is back, baby.

I wrote this post back in February and it still has merit today. You likely have forgotten that we started the year with a huge rally to new highs around the world, followed by a correction that was quick and shallow in the US and dragged on all year for the rest of the world’s markets. If you’ve been watching the nightly news recap, you would think every market was up this year when the reality was only the US markets were positive this year. Darn US dollar strength.


Now we have hit October and suddenly no one wants to buy even the big technology darlings like Apple, Google and Netflix. We were popping Cristal when Apple and then Amazon became the first 2 companies with a $1 Trillion market cap in the world. [Narrator: That’s with a T] We relentlessly chased Cannabis stocks right into last week’s legalization in Canada. Times were great.


October though? October has been that cold bucket of water over our head’s like the ALS Ice Bucket Challenge. Everything that was working and beloved is now “yesterday’s news” and we are left with a bout of volatility. Remember when I say volatility, I really mean “your equities are not going up”. For those of you with sensitive stomachs you might want some Tums available when the October statement arrives.


Equities not going up is part of the reason why owning equities is prosperous for you in the long term. To agree to accept an October of 2018 (or even October 1987) on occasion, you should get some benefit out of the deal with better returns over time. This is one of those times where you pay the price for a better payoff down the road.


Now what do you do? First, do NOT panic. I know that the financial crisis is still fresh in everyone’s mind and that you think every down day is the prelude to another crash. I have seen the pundits being paraded on the telly telling you “This is a crash” or “Get out of stocks because Jupiter is in retrograde”. That is generally a lot of malarkey. Your equities are going to go down more than 10% at some point in the future. It could be now. It could be next year or in 3 years. The truth is no one knows what will happen. More importantly, no one knows the one reason why stocks go down or up because it never is just one reason.


The next step is to review your financial plan. That big document with all the graphs and charts that is collecting dust in your filing cabinet. Pull it out and check where you are now and where you were projected to be at this time. If you are close then that is good and there is no need to be concerned. If you are off plan, then review and renew the plan. You might have missed a material change. If you don’t yet have a plan - we should talk.


Lastly, remember that 2018 has been a down year for equities in every single market around the world except for the US stock market. China is down bigly. Toronto is down. Europe is down. You don’t want to know about Argentina or South Africa. The news has been filled with stories of new highs and it has all been about the United States since the end of January. Did you worry about your stock portfolio in June or July? Probably not because the news was filled with positive stock market reports. Of course what they didn’t tell you was they were only talking about one country.


Investing your savings in Developed World equity markets works in your favour about 75% of the time. It is that 25% of the time where you can make real errors that hurt your portfolio. Where you sell in a panic and miss that one week when things turn around. Getting through those times with a proper portfolio and avoiding the temptation to sell in bad times is how you will ultimately reach your goals. Isn’t that the point of why we save and invest in the first place?