Each month-end we publish total return data for various investment market indices, as well as a composite portfolio return benchmark for model portfolios of three different asset allocations. These may be useful guides to reasonable performance of your own portfolio or its components.
Click to view the Index Return Table.
Click to view the Portfolio Benchmarks.
Empire Life’s blog post of June 22 provided an interesting analysis of past periods of market contractions over 20%, and subsequent recoveries. One notable chart shown here:
The chart makes it clear that expansion phases usually last longer than contractions, and have a larger impact. The article compares this period with the 1970-1985 period of peak inflation and interests rates, noting similar depth and duration of corrections about -23% over 6 months, and recoveries of 55-70% over the following 18 months. Those recovery phases produce returns well above the market average.
Will investors see an environment of low inflation and interest rates similar to the past two decades or something closer to the inflationary environment five decades ago? Perhaps the answer is “somewhere in the middle”. But, here are a few things to remember:
• In either case and as history has shown, staying invested has proven to be a beneficial strategy for the long-term investor.
• Adding to your investments, particularly after large market contractions will likely help expedite your portfolio’s recovery.
Full Article: https://blog.empirelife.ca/blog/corrections-what-we-can-learn-from-the-past
The past trading week went down as the worst week for the TSX since March 2020. The S&P500 benchmark officially ended down 20% from its prior peak in December as the US Federal Reserve hiked its key overnight rate by 0.75% for the first time since 1994. And the media is stoking fears of further declines and possible recession. It is times like these that emotions take over and has investors asking “should we sell to avoid further declines?”
What we do know from history is that the best market days are clustered in with the worst market days and being out of the market for these best days significantly impacts long term returns.
Source: https://ci-arena.ci.com/od/bb0dfeb6
Also, most stock market gains happen shortly after a bear market. Even after the 2008 Great Financial Crisis, most major benchmarks had regained their prior highs in 2 – 3 years.
Source: https://ci-arena.ci.com/od/48cf0671
Investors who exit the market during a bear market risk missing this rebound. Missing even 12 months of the post-2008 recovery would have significantly reduced their returns over the next 12 years.
Source: https://ci-arena.ci.com/od/fea210a9
It is important during periods of volatility to stick to the plan you created with your advisor. This plan incorporates your long term financial goals along with your near term cash flow needs and risk assessment, and will help you through this market as it has done for many investors in the past.
You can call us anytime to review your objectives and make sure your portfolio allocation is appropriate and consists of high quality portfolio managers.
Each month-end we publish total return data for various investment market indices, as well as a composite portfolio return benchmark for model portfolios of three different asset allocations. These may be useful guides to reasonable performance of your own portfolio or its components.
Click to view the Index Return Table.
Click to view the Portfolio Benchmarks.
The below chart highlights the returns from May 1st, 2007 until yesterday’s close – a period of roughly 15 Years. This includes the Global Financial Crisis, the COVID-19 Pandemic, and countless corrections/world events in between.
We’ve shown the returns of 3 of Fidelity’s flagship equity strategies against the S&P 500 and TSX over that time period. Their returns against the indices have been staggering and serve as a reminder that not all active managers are created equal. We believe that Portfolio Managers Mark Schmehl and Dan Dupont have proven themselves as the “elite of the elite”, which is why they have been on our preferred managers list for some years already.
Volatility is part of investing; perhaps some investors have forgotten that over the past 3 years. Rather than trying to figure out when/how it will end — use downturns as an opportunity to add/diversify for clients with the appropriate time horizon and stick to your investing principles. Patience is the ultimate path to success.
15 Years of Returns: Fidelity Special Situations, Canadian Growth Company, and Canadian Large Cap
