S&P/TSX Composite 20275 -4.5%
Dow Jones 31393 -13.6%
MSCI EAFE 1934 -17.2%
MSCI World 2642 -18.3%
MSCI EM 1055 -14.4%
Canada Universe Bond 1036 -12.9%
Policy Rates Next Mtg Bank of Canada 1.50% Jul 13
U.S. Federal Reserve .75% Jun 15
European Central Bank 0.00% Jul 21
Crude Oil WTI (US$/bbl) 120.67 YTD 56.7%
Our current market volatilities have already responded to the above expected returns. The need for the interest rate increases is to try and control inflation that is currently running at a 40 year high of close to 8%. Our housing bubble and energy costs are huge contributors to the current inflation concerns. Real estate is already cooling off and the energy costs will most likely adjust once the Ukraine and Russia conflicts are resolved as they are impacting greatly on energy supplies and costs.
Our portfolio managers are taking a defensive position at this time and rebalancing your portfolios with investments that will benefit from the current market trends.
As an investor, what can you do?
First of all if you have additional funds, this is an excellent time to be adding gradually (dollar cost average) into your portfolio.
Secondly, if you are currently withdrawing from your investments and are able to reduce the amount, it would be a good idea to leave investments intact for a short period of time. For regular scheduled RIF payments, your portfolio contains a portion of fixed income (bonds) that have been set aside to satisfy your income needs. However as you will note from above, Bond prices have also declined as bonds are sensitive to interest rate increases.
What is the outlook and how long will the bear market last?
China has a substantial influence on global growth. An informed view on the trajectory of the Chinese economy is thus imperative to all macroeconomic forecasting and investment-related decisions.
Recessions always catch people by surprise and are not widely predicted.
The bursting of the tech bubble will damage investor psychology and economic prospects, but a downturn similar to the 2000 – 2002 period is not in the cards.
Fantasy money is out and fundamentals are in. The market will continue to reward industries and sectors that can deliver now rather than forecasts for future growth.
There is no shortage of commentators on the internet willing to make this claim. But there is a glaring hole in this argument: no hard data is yet showing a serious downturn in activity. Recession is still just a theory. Yes, numerous headwinds have surfaced: the tech crash potentially weakening labor markets, China’s growth prospects hammered by lockdowns, corporate profits pinched by rising wages, households experiencing soaring energy costs and, most worrisome, the Fed’s willingness to slam on the brakes to curtail inflation. But we are not yet seeing a large slowdown in activity that would signal imminent recession. Consumption is still growing. The labour market remains robust. Capital expenditure is positive.