One of the key advantages of social media platforms is that the people that you connect with online are experts in the topics that are impacting people on a global basis. Over the last year everyone was a trade and geopolitical expert and now it seems that they are also infectious disease specialists. I kid obviously, but the truth is that I believe a large part of the market selloff that we have seen over the last month has also been driven by fear perpetuated by media. In just the last few days I have seen at least 5 market predictions on just how far this market will drop and I would guess that none of those predictions had a whole lot of math behind them. The reality is, nobody knows with any certainty how the market will perform in the short term and so as an investor you need to stop trying. As I pointed out in my last article, trying to time the market has destroyed more wealth (by far) than it has saved which is exactly why successful investors don’t even attempt it.
Given that corona virus is what has fuelled at least initially the recent sell off, I thought I would look at other epidemics that impacted the markets to see how they reacted as a point of interest. Here is some data that I came across which I found particularly interesting:
As you can see, from the point of first identifying the disease, in most cases the market has rebounded quite significantly in the 6 months following and over the following 12 months we have often experienced double-digit returns. Now of course this doesn’t necessarily always hold true and maybe the performance of the index wasn't related to the epidemic either, but I think it’s important to look at and put perspective on the times we are currently experiencing.
On a more personal note, I feel very fortunate to have been in the industry and work through the 2008 financial crisis as well. Lessons learned during that market have helped me to put these events into perspective. Certainly, we are seeing significant volatility at this time but a key difference is that we are not seeing a complete system wide lock up so far. There are certainly concerns but there are also the means to weather this storm. The key to coming out on the other side of these market events is to never react but to respond appropriately. A proper response is well though out and coming from an educated position, not an emotional panic. The proper response today is to continually evaluate opportunities which is exactly what we are doing and putting cash to work as companies go on sale. Patience and discipline are key and unfortunately never easy. Often, the best things to do are also the most difficult.
-Grant White, CIM, CFP®
Grant White is a Portfolio Manager/Investment Advisor at Endeavour Wealth Management with Industrial Alliance Securities Inc, an award-winning office as recognized by the Carson Group. Together with his partners he provides comprehensive wealth management planning for business owners, professionals and individual families.
This information has been prepared by Grant White who is a Portfolio Manager for Industrial Alliance Securities Inc. (iA Securities) and does not necessarily reflect the opinion of iA Securities. The information contained in this newsletter comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors. The Portfolio Manager can open accounts only in the provinces in which they are registered.