Ottawa Investment Advisor John Bruce

Dealing with Market Turmoil

November 15, 2016

Over the past six years, I have had to communicate to you far more often about market volatility than I have ever had to before. As is evident by speaking with you, and with other clients, the turbulence of the past six years has not been easy to go through. I understand and do not want to sound like a broken record, but I want to pass on to you my opinion on what is currently transpiring in the markets.

Even before the markets had their disastrous year in 2008, there were difficulties in 2007 as the market was up, but that was only in very few securities. Any properly diversified portfolio experienced some losses in 2007 and that was compounded with one of the two worst years in results in a century. Even though the markets had dramatic gains in 2009 and 2010, most investors failed to see this as the gains did not make up for the loss in 2008. Just as investors were gaining confidence, the media regaled us with tales of woe from Europe and particularly Greece and how this was going to lead to more troubles. These fears severely spooked investors and 2011 again lost ground. Now we are back to see saw market disruptions from the US election and the uncertainty around what a Trump administration will do and how it may impact our North America Free Trade Agreement (NAFTA) among other policies that are being tossed about.

It is hard to make rational decisions when markets are behaving irrationally. Trying to interpret and profit from irrationality becomes speculation, not investing. I continue to conduct thorough market research to utilize the brightest minds available in managing your money and to make adjustments as opportunities present themselves. While this does not stop losses, it may mitigate the amount of losses so that when markets recover, you are already in a better place than you would have been and will be positive again much sooner than if you were in a passive investment that simply mirrored the markets.

The markets change and the economic factors affecting our investments are always changing. What may be a promising investment with a strong future may suddenly change to less positive from new innovations in that industry or an introduction of new technology or as is the case recently, changes in Government policies that impact economies (i.e. The Carbon Tax, The Bank of Canada changes on mortgage lending)

These external forces that impact our investments are often unseen until it hits or are progressive and gradually show us it’s changing. Nobody likes to take losses in investing, but to ignore them or think they will not happen is flawed thinking. If I call you and suggest we exit and sell something, and if I am suggesting to do so at a loss, then this is after great consideration of the pros and cons of the investment. I do not sell those things that I feel will come back and become positive. I sell something when I believe that it’s broken and only going to get worse or languish indefinitely.

In the last couple of months I have considered different strategies for your holdings that would minimize risk and offer us some safety in the event the US election caused a volatile impact on investments which it has done now. When markets are volatile, it’s natural to be worried about the impact on your portfolio. And when you’re worried, you want to take action.
However, it’s important to recognize that sometimes the best course of action may be to do nothing. If you have a sound investment plan, you already may be in the best possible position to weather the market storms.
I realize that it can be painful and upsetting to watch the value of your investments experience a significant drop. To assist you in understanding market volatility and in protecting your portfolio, I present four strategies for dealing with difficult markets.

There is no strategy that can fully insulate you from a market decline. Nevertheless, we have been through severe market volatility before, and these strategies have been proven to add value and position investors to prosper over the long term.

The strategies are:

  1. Take a long-term view
  2. Be diversified
  3. Resist the temptation of market timing
  4. Take advantage of market volatility

In closing, I want to prepare you for possibly more turbulent markets as we adjust to the new Trump administration in the US Government and the uncertainties that will follow. If at any time you would like to discuss your investments with me, please call me directly at 1-866-860-4190 or 613-491-3344.

John S. Bruce
Senior Investment Advisor
Private Client Division
Direct Line- 613-491-3344
Fax- 613-491-2292
Toll Free- 866-860-4190

Assistant- Brian Donegan
Direct Line- 416-860-7787
Fax- 416-860-6841

Mackie Research Capital is a national investment firm with offices in Vancouver, Calgary, Regina, Toronto and Montreal.

The opinions, estimates and projections contained herein are those of the author as of the date hereof and are subject to change without notice and may not reflect those of Mackie Research Capital Corporation (“MRCC”). The information and opinions contained herein have been compiled and derived from sources believed to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy or completeness. Neither the author nor MRCC accepts liability whatsoever for any loss arising from any use of this report or its contents. Information may be available to MRCC which is not reflected herein. This report is not to be construed as an offer to sell or a solicitation for an offer to buy any securities. This newsletter is intended for distribution only in those jurisdictions where both the author and MRCC are registered to do business in securities. Any distribution or dissemination of this newsletter in any other jurisdiction is strictly prohibited. MRCC and its officers, directors, employees and their families may from time to time invest in the securities discussed in this newsletter. ©2016 Mackie Research Capital. Member-Canadian Investor Protection Fund / member-fonds canadien de protection des épargnants.

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