A persistent state of flux
Published on July 11, 2018
Politics keeps us suspended in a persistent state of flux

In the last few months I’ve met with several clients who are worried that the market could be in for a big drop. They come to me intending to sell everything and get out of the market. On some level, who can blame them? If all we had to go on was the news, there’d be little reason not to sell.

There is almost an endless list of issues that investors seemed to be worried about.  The political situation south of the border is sending mixed messages.  Tax cuts in the US have bolstered the market, while trade/tariff frictions have had the opposite effect.  Europe appears to be in a state of flux and Brexit continues to create uncertainty.  North Korea appears to be ramping up rather than decommissioning its nuclear capabilities following Kim Jong-un’s meeting with President Donald Trump.  Here at home, media reports continue to suggest uncertainty in the real estate market, provincial pipeline issues and NAFTA.

I can’t sugar coat some of the global issues we are facing at the moment. Some of them are indeed cause for concern. We are in a state of flux and that is having an impact on Canadian bond and stock markets. It’s also affecting our currency, as the Canadian dollar continues its decline from almost $0.80 in April to $0.75 toward the end of June. Given what we’ve seen so far from the Trump administration, there is reason to think that this kind of volatility and uncertainty will persist throughout the rest of the term.

Good things are going on under the negative news radar

So, that’s the bad news. The good news is all the stuff happening behind the media curtain. I spoke with a real estate agent not long ago who indicated that while prices aren’t as firm as they were a year ago, properties are still moving and the real estate market in the GTA remains active.

The bank index is negative on the year, but I expect that to be short lived. The banks continue to post record profits, and the rails keep chugging along.  We have a strong economy, relatively low inflation and low unemployment. These are all excellent indicators that Canada is doing just fine.

Then there’s the legalization of cannabis. Cannabis stocks are on a tear in the lead up to legalization in October 2018, which is helping Canadian stock indices overall. But much like the dot-com bubble in 2000, some things can be too good to be true. It is tempting in the face of all the negativity around us to jump on the Mary-Jane bandwagon. However, abandoning the stable (if lackluster), dividend-paying bank, utility or telecommunications stocks in favour of the latest feel-good stocks can be far riskier than waiting out the geopolitical storm we’re in right now.

Carpool karaoke is the perfect antidote to the dreary news

My advice, as it has always been, is to buy-and-hold and stay the course and, of course, turn off the news.

Troubling issues and nerve wrecking events have historically been the norm.  Whether it was 9/11, Oil embargo of the 1970’s, or the tech bubble, to name a few, it’s just the way it is.

Recently I came across a YouTube video featuring Paul McCartney performing carpool karaoke with the Late Late Show’s James Corden which I recommend you watch.  James Corden picks up Paul McCartney in Liverpool and they spend the day exploring all of McCartney’s childhood haunts, performing some of the Beatles’ biggest hits along the way.  In the video McCartney explains that the late sixties was a very troubling time for him.  Success was almost over bearing, the Beatles were having their difficulties etc.  He explains that he had a dream one night where his recently deceased mother came back and told him “everything is going to be okay, just let it be.”  Hence the song Let it Be was written.  So, I say now things appear more troubling then ever, but it will work out, just “Let it Be” I encourage you to watch the video.  I don’t think you will regret it.

In today’s world, I think that’s a sentiment we should all carry with us. Everything works out as it should. And we’re all going to be okay.

Sincerely,

Stephen Sisokin

President

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