2018

What is it This Time?

Good day,

Do investors remember how they felt in 2010 when Greece requested a $53 billion bailout which led the S&P 500 to drop 15.61% from April 15th to July 2nd? Many panicked during that time, while disciplined investors not only held on to good quality companies but added more. The market fully recovered by November 4th of that same year.

What about two years later in 2012 when weak US economic news coupled with Spain entering a recession led the S&P 500 lower by 9.94% from April 2nd to June 1st? The market fully recovery by September 6th of that same year.

Need more? How about 2015 when the S&P 500 dropped 13.31% from November 3rd to February 11th, 2016 and fully recovery by June 7th of that year? What triggered fear that time around?  It was oil dipping below $27 a barrel and worries over the health of European banks amid negative interest rates.

This time, it’s fears over trade wars and rising interest rates.

The world will never be perfect and unfortunately, we don’t have the luxury we had during the 80s when interest rates were over 15% and holding government bonds could meet our financial objectives. As such, an allocation to equities in most portfolios is unavoidable, which means we need to learn from the past by reflecting on previous periods of volatility and recognize that the emotions we might experience today, are no different than ones we felt times before. If quality stocks get even cheaper, value investors will back up the truck. Plan on living another 10, 20 or 30 years? Get used to it. It’s happened in the past, it’s happening today, and it will happen again in the future.

Charts of the periods mentioned above can be found below, courtesy of my buddy Dave Ismay in our Vancouver office.

Have a good weekend!

 

Daniel Popescu CFP, CIM, FMA, FCSI

President & CEO

 

2010: S&P drops 15.61% from April 15th to July 2nd, full recovery by November 4th.  Triggered by Greece requesting a $53-billion bailout – European debt crisis.

(Peak to Trough/Trough to Recovery days: 79/126)

2012: S&P drops 9.94% from April 2nd to June 1st, full recovery by September 6th.  Triggered by weak US economic news (March jobs report added 120K vs expected 200K) and Spain enters recession (Euro debt fears return).

(Peak to Trough/Trough to Recovery days: 61/98)

2015 – 2016: S&P drops 13.31% from November 3rd to February 11th, full recovery by June 7th.  Triggered by oil dipping below $27 a barrel and worries over the health of European banks amid negative interest rates.

(Peak to Trough/Trough to Recovery days: 101/118)

Danny Popescu

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