International events, political news and some positive economic data converged to create higher volatility. The markets reacted negatively to North Korea’s nuclear saber-rattling and continued perceptions of poor leadership from the White House over the Charlottesville violence. Emerging market stocks had the advantage this month, alerting investors to greater risk. Q2 earnings (particularly in Europe) were better than expected. Interest rates increased, strengthening the Canadian dollar – while the US dollar continued to drop.
Gridlock over budget in US politics isn’t helpful to market confidence
The Trump administration’s brinksmanship with Congress over tax reforms and the debt ceiling has added some tension to markets. Government funding is expected to run out by September 30, unless Congress can make a deal. At the same time, these high-risk games of budgetary chicken are not new to Washington. Meanwhile, in Europe, no matter who wins the upcoming German election, it seems relations with the US as well as the UK over Brexit could slide further. That could potentially dampen trade relations in the long term.
Tech stocks see gains, helping shore up the stock market overall
Large tech companies performed admirably. Apple saw a good run from sales of its latest iPhone though it is far from clear for the company in particular how long the good times will last. Also, if it wasn’t for the big-brand tech companies, U.S. indices would be lower, as most stocks are trending downward.
Canada logs some impressive wins in the resource sector
There was better news north of the 49th parallel, with surprisingly strong economic growth overall. For instance, we’ve seen an average annualized growth rate of 3.75 per cent over the last four quarters. Partly, that’s thanks to the resource sector. Base and precious metals stocks came out strong as gold and copper outperformed. But aside from energy and health care, all sectors of the economy were up in August.
What does all this mean for your investments?
Volatility impacts every investment portfolio at some point. But, as any experienced investor knows, staying the course pays dividends in the long-run.
Your WealthBar portfolio is professionally diversified and optimized to mitigate loss in the wake of tumultuous times.
Like many investments, our portfolios have experienced a decline as a result of the appreciation of the Canadian dollar and the rise in interest rates. Our balanced portfolio was down 2% from its peak this year. From May to September, the US dollar has declined by almost 9%.
We have seen similar currency declines before, most recently in early 2016 when the US dollar declined 14%. Following this decline, the value of the US dollar stabilized and our portfolios regained ground, outperforming the Morningstar Canadian Global Balanced Fund Category.