It’s been a challenging year for investors as markets have been quite volatile throughout the year. The main reason for that has been the trade war between the US and China which was just heating up around this time last year and really has continued to drag out throughout the year. Chinese companies as well as companies more dependent on trade or with a specific exposure to China really suffered throughout this year at points. We seem to have gotten a ceasefire with the latest phase one deal which has yet to be signed, but it’s far from clear that we are out of the woods.
Another source of volatility has been energy prices here in Canada as our continued disputes over pipelines and climate change has left a number of Canadian companies out in the cold. Luckily further production cuts by OPEC this past month as well as signs that American production is slowing down have led to higher prices for Oil and that has resulted in a bounce for some Canadian energy companies (though not all). Still I’ve been pretty happy with our investments in energy over the past year.
When all is said and done, we are ending 2019 at record highs in most North American Indices and the markets have produced a tremendous return for 2019, despite all of the volatility. So what can we learn from this?
Well for one thing, volatility doesn’t necessarily mean losses. This was one of the more volatile years in the past 5 years and it will also end up being the most profitable year for many investors in the last 5. So while high volatility commonly means higher risk for many investment managers, the higher volatility in 2019 seems to have led to higher overall returns.
Another lesson that has been re-enforced this year is the importance on focusing on the businesses that you own, and ignoring the big picture stuff. If we had worried about the big picture macro issues this year we would have been selling on each of the following events:
Chinese – US Trade War
Saudi Aramco Bombing by drone explosive
The threat of a No-Deal Brexit
Riots in Hong Kong
A potential war between Iran and the US and between Iran and Saudi Arabia
The Bond Yield Inversion signaling a potential recession
Impeachment proceedings against President Donald Trump
Worries over a potential policy mistake by the Federal Reserve which could cause a recession.
And these are really just off the top of my head. These are all stories which made headlines in 2019 and which drastically impacted the markets on the days that they happened. By focusing on the strength of the businesses that we own, we were able to not only avoid selling good businesses, but instead to buy more of those good businesses at even more attractive prices.
In spite of all of the positive returns this year, we still have areas that we can improve upon in our investment selections. That’s perhaps the most important lesson that I can take away from 2019. There is always room for improvement, and you should never stop trying to improve.
- Craig White, BA, LL.B., CIM
Craig White is an 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 Craig White an Investment Advisor 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 Investment Advisor can open accounts only in the provinces in which they are registered.