June 11 Market Selloff

Posted 12 Jun 2020 by Rick Irwin, CFP, CLU

After a relatively calm start to the month of June, yesterday stocks experienced the worst one-day selloff since mid-March. The US stock market, which makes up approximately 55% of global market capitalization, fell 6% and Canada held up a little better at -4.4%. The sell off was prompted by less optimistic (though not necessarily negative) comments from the US Central Bank (the “Fed”) as well as reports of increased Coronavirus cases in the US.

News headlines can be quite dramatic when markets experience big moves, using phrases like “surge” and “plunge.” (Imagine replacing the up and down arrows on elevators with these words!) Often, the effect on your portfolio may not be as dramatic as the headline numbers might suggest.

Diversified portfolios with funds that invest in bonds and other assets historically help mitigate the damage when stock markets sell off sharply. The Canadian dollar fell against the US dollar, which is normally the case during periods of uncertainty, and this helps cushion the blow for US investments held in your portfolio. Strategic active management by fund managers positioned some of their funds into precious metals, which helped on the downside. There was also a significant spread between funds that invested in “work-at-home” stocks (Zoom, Docusign) that were up modestly and the “reopening” stocks (Carnival, American Airlines) down double digits.

Currently overseas stocks and futures markets (pre-trading on US exchanges) point to a potential rebound , possibly indicating that the markets feel that yesterday’s selloff was a bit overdone. There is still much uncertainty about the path of the virus and timing of a vaccine, and the degree to which various parts of the economy recover as the gradual reopening rolls out, so it is likely that markets may continue to be somewhat volatile as we move through the summer months. It’s important to remember that we have put together a portfolio to weather the storms as they come and that your fund managers are working hard on your behalf to navigate these waters. If you have any questions or concerns, please do not hesitate to reach out.



Sources: Yahoo! Finance Listings

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