The Finance Blogger


Keep Market Declines in Perspective

Keep Market Declines in PerspectiveWe received the following email excerpt from our investment adviser and wanted to post it here for our readers. Here is Keep Market Declines in Perspective in verbatim. Also as of this update in Aug 2016, most people feel that there is another major adjustment in the markets coming which will get everyone concerned and excited. Well the adjustment in the markets never came as of Aug 2016 and now they are talking about the bull market continuing. The markets continue to roll along and increasing. Some people now feel that the DOW will hit 25000 before 2020. This is when I begin to get really nervous and we need to keep in mind the comments of sound minds and people who really know the markets over the long term. The comments of our investment adviser are even more important in situations like this one coming.

Everyone will have their own perspective on what they should do, however the important thing is to never sell low and lock in your losses. Read the following and then let us know what you think about the overall strategy of Keep Market Declines in Perspective.

With so much going on in the market and economy, I wanted to provide some perspective from Canadian Market Strategist Kate Warne. This advice will apply to many investors and they will find it helpful in forming their overall investment strategy.

Keep Market Declines in Perspective

Although the U.S. debt ceiling increase removed concerns about a possible U.S. government default, stocks have continued to decline based on several recent weak economic reports and worries about European debt. Revised U.S. gross domestic product (GDP) calculations showed growth was 0.8% in the first half of the year, which was much weaker than expected. While first-half growth in Canada was somewhat stronger, slower economic activity in the U.S. and around the world will have an impact on the Canadian economy. However, not all the news was bad. Canada’s most recent retail sales reading was better than expected, and while U.S. consumer spending declined slightly in June, as consumers turned cautious, the month of July showed they were becoming more confident.

Ups and Downs Are Common

Stocks have dropped by more than 6% over the past two weeks, and the TSX is down about 13% from the high it reached in April. Even though they can be unsettling, these types of stock market declines are common and not a reason to abandon your investment strategy. In fact, long-term investors frequently view them as opportunities to add quality investments at lower prices.

Historically, stocks have dropped by 5% about three times a year, and we’ve just experienced the second 5% decline in 2011. They’ve also dropped by 10% about once a year, which has occurred recently. And looking at last year, the TSX dropped about 10% in response to similar worries about European debts, but the market rebounded to end the year up nearly 15%.

A Bright Spot in Corporate Earnings

These reports also may suggest that U.S. job growth sputtered in July. This helped keep the U.S. unemployment rate high, since improving economic growth normally leads to hiring. Slow economic growth is certainly disappointing, but it can still be a good environment for investors. Many people may be overlooking strong second-quarter corporate earnings, which are up more than 30% over the past year. Companies in the TSX and S&P 500 are on track to reach new record high earnings this year, but their prices haven’t kept pace. As a result, we believe many quality companies are attractively valued.

Invest in Your Strategy, Not Your Emotions

Investing is more than buying when you feel good and selling when you feel bad. It’s about developing and sticking with a solid strategy that addresses your needs today as well as your long-term goals. It can be tempting to turn your back on your investment strategy, but we believe that is a mistake. You can’t control the market or the economy, but you can control how you react to them. If you find yourself reacting to every headline, it may help to take a step back and evaluate the longer-term positive trends in the economy and earnings. We believe they will ultimately matter more than the market’s short-term ups and downs.

 

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2 Responses to “Keep Market Declines in Perspective”

  1. you are absolutely right about the volatility of the market. if you are involved with high quality stocks that pay a dividend every quarter, have a history of always paying their dividends and have a history of increasing their dividends , you do not need to worry about the volatile market very much

  2. I really worry about the stock market and how fast it changed. The market will stay volatile for a long time

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