2018

An Ugly Week

Good day,

Uncertainty around trade tensions between China and the US coupled with a rising interest rate environment negatively impacted markets this week.  As mentioned on previous occasions, investors often fear uncertainty more than bad news. As human beings, we have a difficult time dealing with the unknown but when there’s a problem, we assess it and generally get some comfort once we understand its severity.

There are countless historical events which left investors fearing the unknown in the short term. These include: political worries, terrorism, financial crises, commodity price fluctuations etc. When the dust settles, an equity buying spree follows but investors have a short-term memory and rarely learn from history. Earlier this week, we compiled numbers showing the rate of returns for major North American markets (see below). While the numbers are positive, multiple events occurred during the period which investors perceived as negative, creating short-term volatility for these very markets.

As interest rates aren’t what they were in the 80s and early 90s, buying GICs and Government Bonds will not allow us to reach our lifestyle objectives. As such, we have to include equities in our portfolio mix to give us the returns necessary to meet our objectives.  That said, we’re human and few of us can stomach significant volatility. Our response to the above is to be selective on the equities we pick by looking for quality companies in an upward trading trend, and couple this approach by maintaining a significant weighting to stable private debt securities.

Market 1-Year 3-Years 5-Years 10-Years
S&P 500 11.29% 13.63% 12.67% 14.48%
NASDAQ 100 17.24% 18.39% 18.19% 19.72%
TSX Composite 0.52% 6.34% 6.65% 8.14%

 

Danny Popescu

“I have prepared this commentary to give you my thoughts on various investment alternatives and considerations which may be relevant to your portfolio. This commentary reflects my opinions alone and may not reflect the views of Harbourfront Wealth Management. In expressing these opinions, I bring my best judgment and professional experience from the perspective of someone who surveys a broad range of investments. Therefore, this report should be viewed as a reflection of my informed opinions rather than analyses produced by Harbourfront Wealth Management Inc.”

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