Market Update. Risk management remains key during a time of high volatility
- Balanced ETF Portfolio up 12% over 1 year.
- Growth ETF Portfolio up 13.5% over 1 year
- Aggressive ETF Portfolio up 15.2% over 1 year.
See more about how our portfolios performed.
We’ve entered a period of higher-than-normal volatility for investors. The Dow fell 1,000 points on Thursday, but a rally may be coming up. Contrary to what you may have heard, the stock market has not crashed, though the market is going through a correction (basically, a 10 percent drop from a market high). Stocks bounced back again this Friday, even as investors remained jittery.
We are likely to see further movement in coming days. Our strategy has been to reduce the ups and downs of the market through diversification of assets beyond equities.
Why this is happening. Bonds, interest rates and the overdue gravity of the market
Up to and including this week, market fundamentals still appeared strong, with experts generally citing robust numbers on jobs and the economy in general. However, as many market observers have been expecting for years, the US Fed has stopped its bond repurchasing program which began as a response to the 2008-2009 downturn. As well, interest rates have begun climbing again after near-zero rates for several years. The “easy money” that helped prop up markets for years is not quite as easy as it was. Rising inflation is factoring into investor unease.
Interest rates are on their way up in general, though notably Canada’s interest rate has held relatively flat along with short-term bonds, partly owing to slightly-less-than-expected jobs numbers. We are well-placed to reduce exposure to rising rates by holding short-term Canadian bonds.
As mentioned above, this market correction had been anticipated by many experts for some time, even if the precise timing was in doubt. Indeed, after a runaway bull market that endured for much of 2017, some are even calling this correction ‘overdue and welcome’ (CNBC) – and that overall, this bull run might not yet be quite done.
Focused on risk management
Through WealthBar’s partnership with Nicola Wealth Management, we are able to offer Private Investment Portfolios that are specifically focused on growing and preserving capital over the long term.
As Nicola Wealth Management Portfolio Manager Sean Oye commented this week: “Nothing has changed too drastically on our side. What we saw on Monday was not a fundamental change, in our view. We are still witnessing synchronized global growth with the U.S. economy having the wind at its back with recently passed tax reform and deregulation. The S&P 500 just had its best January performance since 1997, so a pull-back is both normal and healthy. In the U.S., there are no immediate signs of a recession, but we are mindful of pent-up inflation and the Fed’s ability to stay ahead of the curve.”
What does all this mean for your investments?
We have prepared for this season of volatility over the long term already and are recommending that investors stay the course. This is precisely the time when WealthBar’s portfolios, which focus on mitigating volatility, will show their value. After another positive month of growth in January, markets are currently in a time of some uncertainty and volatility.