After a bit of volatility early in the year, things have returned to
“normal” again. The small correction we experienced was the first real
volatility after a number of years of smooth sailing, which is unusual.
This long bull market started after the 2008-09 credit crisis with much
government stimulus and is now mostly running on its own stream. We have
increased synchronization with the world’s top economic areas (Europe,
U.S., China, and Japan), and all are performing well, which doesn’t often
happen. That is why markets continue to trend upwards, and why most
economic news is positive.
While Canada outperformed most world economies for a number of years as oil
prices went to $100 a barrel, it has been lagging recently, and this is
expected to continue. Canadians are carrying too much debt (much of it in
their homes), and any upward movement of interest rates will take away
disposable income or income that would likely be spent elsewhere in the
economy. Real estate prices, especially in Greater Vancouver and Toronto,
are a concern for many reasons.
Many economists think our dollar needs to trend lower based on the economy
today. U.S. President Trump’s protectionism also has many in a “hold” mode
as it’s difficult to spend money in an industry that may be hit with
punitive tariffs in the near future. Uncertainty isn’t good for forecasting
or for business in general, and Canada has too much uncertainty now: low
oil prices to NAFTA; record high real estate to high consumer debt; plus
The takeaway here is to continue to diversify your portfolio and be mindful
of having too much Canada in your mix. Most growth right now is elsewhere
in the world, and this may continue for a few years. Having 100% equity in
a market that is near the end of a mature bull market is a very risky
I like infrastructure and real estate as good diversifiers because they
aren’t highly correlated to the stock markets. Find a way to own fixed
income even though the return isn’t sexy and won’t be anytime soon. This is
not the time to be too aggressive for the same reasons. Watching $500,000
turn into $300,000 isn’t fun and that can happen with a 35%-40% correction.
A couple of Warren Buffett quotes to end on and emphasize the importance of
* “The first rule is not to lose. The second rule is not to forget the
* “We simply attempt to be fearful when others are greedy and to be greedy
when other are fearful.”
Bruce Loeppky is based in Surrey, B.C. and is registered with
Portfolio Strategies Corporation as a mutual funds person. He is a regular contributor to the Fund
Library. He can be reached at email@example.com.
Notes and Disclaimers
© 2018 by Fund Library. All rights reserved. Reproduction in whole or in
part by any means without prior written permission is prohibited.
The foregoing is for general information purposes only and is the opinion
of the writer. No guarantee of performance is made or implied. This
information is not intended to provide specific personalized advice
including, without limitation, investment, financial, legal, accounting or
tax advice. However, please contact the author to discuss your particular