The market has recently seen a bit more volatility. Canadian securities fell back slightly by 0.75% in June, while US stocks held flat. Tech stocks were down, while foreign securities resumed their upward trend.
Canada at a crossroads for performance thanks to the continuing oil glut
Despite encouraging macro data for jobs, housing, GDP, retail sales, etc., Canadian stocks took a downturn in June. Partly, that’s due to a somewhat dated perception of Canada as a petro-centric economy. The slump happened as the global oil balance points to tougher times ahead for domestic producers. Significant sell-offs were registered across the board and throughout the month, from energy shares to government bonds.
As prospects for increased Bank of Canada rate meaningfully expanded (which is quite a turn of events given April’s official communication to the contrary), the summer period isn’t going to be very warm to Canadian assets.
International investors wary as tech stocks tremble and US political scene gets complicated
Abroad, investors suddenly jumped off the FANG (Facebook, Amazon, Netflix and Google) group of stocks and similar offerings last month, thanks to poor results on the part of Apple. Meanwhile, as Amazon made a play to buy Whole Foods, business experts speculated about the longer-term possibilities of bringing innovation to the supermarket sector.
Accordingly, market watchers revised expectations downward about potential grand-scale US policy reforms and the potential for tech stocks’ growth.
The winners out of these changing expectations: Emerging stocks. Investors who are wary of US assets and looking for non-fixed-income options had to default their choice to Europe, Japan or Emerging stocks. The most perceived value belonged to the last of these choices, as natural-growth becomes more attractive than growth stimulated by monetary policy.
Investors look to global equity investments as a bulwark against uncertainty
Despite a lack of clarity around the objectives of the 2018 Federal Reserve and a credibility crisis at the White House, confidence remains high for global equity markets.
Expectations for global growth continue to favor equity investments over fixed-income. Cash flow growth, share buyback growth and dividend growth are still coming at attractive premiums above bonds’ yields. That means there’s still a world of opportunity for the far-ranging, discerning investor.
It is important to remember periods of high volatility and market declines are part of regular market cycles.
These are the times when it is most important to maintain a disciplined and diversified investment strategy: namely, hold steady throughout the market cycles and avoid making impulsive decisions.