Wouldn't life be boring if we knew what the future held?
The answer is YES, but as humans we spend endless amounts of time trying to figure it out. When, in fact, all we can do is be ready. Life comes at us fast. Remember history may not repeat itself, but it does rhyme.
Presently we are speculating more than ever about the future of a second wave of Covid-19, to elections, to border openings, to stock markets. The latter is my focus of conversation. And much like predicting the weather it is unreliable outside of a few days. For this reason, we must expect the unexpected. It is why we develop a plan that will meet your needs and objectives when the unexpected happens.
In thinking about the outlook for stock markets, the range of possible outcomes is wide. The following table highlights the key talking points from both a pessimistic and an optimistic perspective.
| Pessimists say.... | Optimists say.... |
| Unprecedented economic shock | Policymakers have acted to prevent panic and liquidity/solvency issues |
| Stock market normally falls further during recessions/crises | There’s no rule that stock markets must become irrationally cheap during recession/crisis |
| Year-ahead P/E ratio risen sharply due to plummeting earnings | Net-prevent-value analysis argues equity decline has been sufficient to reflect diminished stream of earnings |
| Some industries are likely to be depressed for an extended period | In U.S., tech sector plus health sector do fine and are roughly half the market |
| Institutional investors skeptical of market rebound | Stocks quite cheap relative to bonds |
| Risk of double-dip if re-opening proves premature | So far, economy has rebounded more quickly than initially expected |
| Recovery unlikely to be complete until 2022 | Stock market doesn’t care about 2020 – looking to future years |
It is impossible to say which arguments will ultimately prove the most relevant in the short term. Consequently we prepare for either outcome by having your short term and long term needs allocated appropriately.
This years extreme volatility has offered an opportunity to assess managers. I have been very pleased with the performance. My favourites have delivered on the fundamental point of investing - PERFORMANCE.
I look forward to highlighting how that performance translates to your money.
Have a happy and healthy start to your summer!
If you should have any questions or concerns please do not hesitate contact me.
Matthew Bishop,
Investment Funds Advisor
Resource: National Bank - Index returns are for information purposes only and do not represent actual strategy or fund performance and do not reflect the impact of management fees, transaction costs or expenses and investors cannot invest directly in any index.