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JEREMY TABARROK – FINANCIAL UPDATE (SCOTIA MCLEOD PORTFOLIO AND WEALTH MANAGER)

JEREMY TABARROK – FINANCIAL UPDATE (SCOTIA MCLEOD PORTFOLIO AND WEALTH MANAGER)

(Jeremy shares his thoughts on economy and investment tips)

I wanted to share with you our thoughts on the market as we haven’t seen this type of volatility for a number of years now and, understandably, it can be unsettling.

 

Although we suspected that there was a correction in the making, as always it was difficult to determine exactly when it would occur. In my May Newsletter, I wrote that, according to past averages, we were well past due for a correction of this magnitude. On average, a correction of this size happens every 18 months in a bull market; we were into 34th month when this correction started. So this is not uncommon, or unexpected.

 

Historical data does assist in helping us predict the likelihood of a correction, but it is how we prepare that enables us to manage the ups and downs of this market situation. One way is having a balanced portfolio.  What hasn’t been reported in the news is the US government 10 year bond has rallied up 10% during this same time period. Companies balance sheets are healthy and our dividends continue to be paid regardless of the market turmoil. Lastly we’ve prepared by building up our cash position in our accounts by collecting our dividends rather than reinvesting them.
Over the last 12 months we have held onto larger amounts of cash in our accounts than we had in the previous few years. Additionally, when we have been adding to your portfolios it has often been more bonds or balanced funds. So we are unlikely to feel the full decline of this correction and more importantly are well prepared to take advantage of it.

 

In the May Newsletter we found that most 10% corrections last about a month, on average, and that it takes two months to recover. Corrections of 10%-20% average five months in duration and it takes four months to recover. Keeping these averages in mind, after a correction of the size we are experiencing today, it’s likely that we’ll not only recover all that was lost, but hit new highs again all within 12 months.

 

 

What’s Next

It’s clear that the economy is not firing on all cylinders and may require help from the Central Banks once more. I would not be surprised to see the European Central Bank start its own version of Quantitative Easing, which the US Central Bank used so successfully. Additionally, I suspect interest rates in North America will stay lower for longer. That’s great news for anyone with a mortgage or loan.

 

We are likely to see that companies are doing rather well and making respectable profits, as earnings reports continue to come in over the next two months.

 

Often these rapid downdrafts bring down the prices of good and bad companies alike, and offer a good opportunity to add to positions we love – at a deep discount.

I know that the news headlines can be unnerving. That’s why I’m here to help you best manage these short-term gyrations in the market and see your portfolio through the long game.

 

We have just finished publishing our Portfolio Managements Groups (PIMG) Newsletter which I have attached to this email for our additional thoughts on the markets.

 

Please do not hesitate to contact me, as you may wish to talk in greater detail about your portfolio specifically.

 

Best Regards,

 

Jeremy

 

 

Jeremy Tabarrok, CIM | Portfolio Manager | Wealth Management
Head Office Branch
____________________________________________

40 King Street West, 15th Floor| Toronto, ON | M5H 3Y2

Direct: 416-945-4660 | Toll Free: 1-800-387-0489
Fax: 416-862-3087|  Jeremy_Tabarrok@scotiamcleod.com
www.JTWealth.ca

 

Office: P. 416.441.2888; F. 416.441.9926; 2145 Avenue Road, Toronto, Ontario M5M 4B2
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