Trinity's Team Market Watch

Posted 22 Jun 2016 by Rick Irwin, CFP, CLU; Patricia Bell, PFP; Melissa Allan; Lorna Maughan

Markets the world over have recovered somewhat over the past few months after a rocky start to the year, but a corresponding currency recovery in the Canadian dollar erased much of the gains for Canadian investors. The Toronto stock market, after being a notable laggard for the last few years, has had a strong start to the year, up 8 percent to the end of May. The US stock market, as broadly measured by the S & P 500 index, was up 2.6 percent in local currency but down 2.8 percent in Canadian dollars. The overseas markets were down 5.3 percent in local terms and down 8 percent in Canadian dollars. While the weakness in the Canadian dollar, which slid to just above 70 cents US, was a buffer for the first few months of the year it was clearly a headwind for the last few months as it rose back into the high end of the 70 cent range. The expectation is the Canadian dollar and US dollar will fall into a slightly less volatile mid 70s trading range and will not be as great an influencer of foreign currency investing going forward. But as Yogi Berra famously said, “predictions are hard, especially about the future.”

Overall the outlook is quite mixed for the short term, given some hurdles globally that will likely have to be overcome before we see any meaningful movement back up. Markets dislike uncertainty and there is a lot of that presently. Everything from the pending vote in the UK on whether they will remain a part of the European monetary union or not, to the slowdown in China, to the outcome of one of the most... interesting... US elections in many years. All of this is weighing on investor’s minds. Yet at the same time, we must remember that markets have always had to contend with uncertainty and this time is no different. Patient long term investors must take the good with the bad, knowing with confidence the course of their long term journey is set and they will still reach their goals despite the short term roadblocks.

  Rick Irwin, CFP, CLU

“Over the past few months I have attended several conferences and heard direct updates from several of the professional money managers that I respect and have worked with for years who manage money for my clients. A common theme was that many have taken on a defensive stance in the current environment, as well as exhibiting near term caution, but also they expressed generally strong optimism for the longer term. I’ve provided a summary of these meetings in the next article.”

 Patricia Bell, PFP

“If you fear the effects that market volatility will have on your retirement income, you may have a bit more CPP to depend on at least. The ‘agreement-in-principle’ reached between the federal government and most provinces will increase the maximum benefit you’ll receive to $17,478 (it's currently about $13,000). This is, of course, funded in part by a contribution increase of 1% to be phased in beginning 2019.”

 Melissa Allan

"Fund managers tend to focus on longer term results and investors should do the same. There's almost always something worrying the markets in the shorter term. Despite this longer term focus, managers are still active within their funds at times of uncertainty (and this time is no exception)."

 Lorna Maughan

“It would be pertinent for me to comment on “Brexit,” as a non-UK-resident but still a UK Citizen I was able to place my vote, via proxy last week. Having spoken to some friends and family back home who have made a definite decision, lots more are undecided. The uncertainty is having an effect on currency and markets and I think we will all be pleased when 23rd June has arrived and we know the outcome.”

Remember that the news media has a very short term, and often sensationalist focus, with a general bias to amplify the negative and oversimply complex subjects into a juicy soundbite or headline. Professional managers, and advisors, take a longer term view based on their experience and longer focus. (That said, several of the managers we work with have acknowledged that they don’t ignore the short term “noise” of the markets if they feel it is prudent to protect their client’s money by taking a shorter term defensive stance. In the end, common sense and tried and true principals always win out; take a long term focus, be diversified, invest within your comfort level, and avoid falling prey to the all too human emotions of greed and fear that can be such potent destroyers of wealth. If you’d like to discuss how your investments are positioned currently, or if you have any questions or concerns, as always, do not hesitate to get in touch with us .