Volatile Year
We hope everyone had a fantastic summer, hard to believe it is already October. We wanted to send out an update to give you our thoughts on what we are seeing in current markets.
September was a horrible month for markets and the worst month yet for this decline. Although no fun this is normal. It is typical for markets to be their worst at the tail end of the decline. We have experienced two bouts of panic selling this year, one back in June and the most recent in September after the July rally. Universal pessimism is also present and important box to check when reaching a market bottom. Investor sentiment is now equivalent to or worse than back in 2008.
Selling is amplified by investments done with loans. We have gone from a period where you could borrow at very low rates and invest the money in a rapidly rising stock market. This situation has been turned upside down. This has caused people to rapidly sell investments to cover these loans, and many are forced to sell when the loans get called in. When forced selling kicks in even the safest investments fall. The bond market has had its worst performance in memory.
During times like these we remain focused on the only thing we can control, our process and discipline. This volatility represents an opportunity for conservative income investors. Very safe income investments like banks, utilities and real estate and even bonds which have fixed maturity values have fallen in value due to forced liquidations. The opportunity is twofold: we can lock in very high income levels by purchasing them cheaply, and these kinds of investments come back very quickly when markets calm. While this all plays out we get paid to wait.
We are very pleased with the way our client’s investments have held up during this decline. Our dividends have not been cut, and many companies have raised payouts this year. We know from experience that if the income is not cut that the share price will recover when things calm down. We now see opportunities in both bonds and high quality stocks.
When the market sees that inflation has peaked we will see a rally on that news. Any good news on the Ukraine/Russian war will help markets too.
Please reach out if you have any questions or concerns and we are happy to discuss in more detail.
Tchabushnig Wealth Group.
This communication has been prepared by Alan Tchabushnig and expresses the opinions of the authors and not necessarily those of Raymond James Ltd. (RJL). Statistics, factual data and other information are from sources RJL believes to be reliable but their accuracy cannot be guaranteed. It is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. It is intended for distribution only in those jurisdictions where RJL and the author are registered. Securities-related products and services are offered through Raymond James Ltd., member - Canadian Investor Protection Fund. Insurance products and services are offered through Raymond James Financial Planning Ltd., which is not a member - Canadian Investor Protection Fund.
