In case you blinked, global stock markets swooned badly this week, taking us back to levels last seen two years ago. The decline is rather typical of market behaviour and the ongoing tug of emotions between fear and greed.
Since the vast majority of my clients hold substantial cash and bond positions, you likely only experienced about ¼ of the 10% downdraft. Markets bounced back somewhat towards the end of the week, which should provide some degree of confidence. Please call me at your convenience at 250-898-9973 if you would like specifics for your own accounts.
By remaining focused on the long term aims of your investment portfolio events of the recent week should cause you little or no concern. I have been doing some buying for my own accounts, and see this as a chance to deploy some of the cash that I have had sitting on the sidelines.
Of course not knowing what the next move in the market will bring, I hesitate to invest all of my money, and am happy to own some high interest cash and bonds that provide stability to my portfolio. I am not a big risk-taker with my family’s savings, and strive to treat your savings the same way.
The best article I read on the markets this week was entitled “Don’t read this!” written in acknowledgement of the tremendous amount of ‘noise’ that accompanies a market down draft like the one we have experienced.
Of course I read it anyway, because I feel it is my duty of care to sift through the cacophony for some gems of wisdom. Those often come from our Canada Pension Plan managers, or the top economic advisors to President Obama.
Here is my one ‘take-away’ from the past week, courtesy of Mohamed El-Erian, chairman of President Obama’s Global Development Council. He says that the evolution of global market turmoil has been “…quite traditional so far. What may be different this time is whether longer-term stability can be restored with the policy tools that were available in the past.”
To paraphrase his technical analysis, he suggests that better distribution of global wealth would go a long way towards creating the demand upon which businesses can grow. This is the aim of global leaders – for better or worse – to create billions of new consumers from among the world’s less advantaged.
How the world achieves these economic benefits, and the extent to which this growth supports local communities, will be crucial to the well-being of our environmental and social fabric and by extension, the stability of our financial systems.