The news headline would appear to paint a bleak picture for global economies.
Geopolitical tensions are on the rise as the US wages trade wars with its allies, Italy’s new populist government threatens to destabilize the European Union, and North Korea continues its sabre rattling.
Here at home, we have persistently high real estate prices in some markets, rising interest rates, and a provincial pipeline controversy.
We are constantly being bombarded by negativity—in our inboxes, on social media, in the newspapers and on television. All around us, menacing clouds are forming, and since markets are emotional beasts, they’re feeling and reacting to a disruptive climate.
The funny thing is, there is no good earthly reason for it. Once again, Canada’s banks reported record earnings. They are as strong and stable as they have ever been. What did this good news produce? A decline in stock prices. Overall earnings have been quite good, and one could argue that increasing interest rates are a sign of a strong economy.
Keep your eye on the horizon
As I have said before, they key to surviving these volatile times is to keep your eye on the horizon. Company earnings are good. Inflation remains low, and unemployment rates continue to hover around all-time lows. Our country’s two rail companies, CN and CP, are at all-time highs. When rail does well, it usually means the economy is doing well.
Markets don’t always go up. It’s a reality that’s hard to swallow given that we’ve been experiencing a bull market for the better part of the last 10 years. But if we look beyond what’s in front of us and into the horizon, we will realize that this short-term volatility, and the sources that are causing it, will pass. Stay the course.
The markets may temporarily be gloomy, but this too shall pass. Compared to many other events in world history, what is happening now may well be considered relatively minor. We will get through todays challenges and have other new events to face. However, the future is bright and we believe the markets will continue their trajectory upward, although not necessarily in a straight line.
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