What’s worse than our portfolios dipping in the short term?

The price of everyday items such as food, fuel, and other necessities continuing to rise at this rate. It’s one thing to see long-term investment holdings temporarily drop in value; but to pay 9% more in expenses this July, versus last July is another thing. It’s not sustainable nor acceptable for any developed nations, that have powerful monetary policy tools at hand, not to make strong efforts to alleviate this. So here we are. Central banks have aggressively hiked interest rates to combat sky-high inflation and the market has priced in that they will continue to do so. It’s short-term pain, to prevent long-term suffering; and it could very well result in a recession. This is why the stock market has been shaken up so badly (and the markets are always ahead of the game). That being said, a recession is still a better outcome than the alternative of persistent, higher-than-targeted, increases in the consumer price index (CPI). Central banks simply cannot allow inflation to eat away at spending power faster than their ~2%/year target. This would be particularly detrimental for those that are most affected by price increases (pensioners, persons with disabilities, low-income families, etc). The belt-tightening must be done!

I wouldn’t be too concerned with the markets though. They have been through situations like this before, and arguably the worst threat to a total economic collapse was in 2008. It took 18 months to recover from that. These times do not seem nearly as alarming, and we’re already 7 months into this downturn.

I admit that this may not be the most overly optimistic “What’s Happening Today” (and hopefully I still have a job when Mike returns), but I’ll leave you with a recent quote made by our Managing Director and Deputy Chief Economist, Benjamin Tal of CIBC World Markets:

"If you look at the stock market now…if your time horizon is two to three years…there are some very good opportunities out there—especially in Canada."

As always, we welcome any call, text, or email, so please reach out if you have any concerns. It’s not easy seeing those statements these days, but you’re not alone, this will not last forever, and we are here to talk, monitor, and make adjustments. In the meantime, it’s probably a great opportunity to add high-quality assets at fairly low prices.

And on a final note of positivity, the markets have had a huge day today!

Perhaps Mike should take more days off…