Okay, not those bears. Canadians are almost afraid of bear markets as they are of an angry grizzly.
But just as the fear of these animals is irrational, so is the fear of bear markets. Fear trumps logic. If you’ve never lived through a bear market with a portfolio hanging in the balance, it’s a humbling experience.
As a financial advisor, a tumbling market is an anxious time, not only because we hate to see portfolios losing ground, but more importantly because our clients are on edge.
But is this really a time to sell off those investments and get out?
This question sprang to mind this morning as we watched the fallout from the Canadian markets hitting a two-year low.
All those old fears are percolating again. But are we really entering a long-term correction? That’s not our take. And our thinking is reinforced by a timely piece by Greg Valliere in AGF’s Morning Bullets.
The article points to good news like strong GDP growth, wage acceleration, solid corporate earnings and a diminished geopolitical threat. Here’s their bottom line:
“Obviously there are concerns; markets can always find a wall of worry. But our bottom line is that the euphoria genie — always a warning signal — is back in the bottle after this summer’s frothiness. A significant selloff was inevitable, and now expectations are more realistic. Some air has seeped out of the bubble, and that’s a good thing.” – Greg Valliere
Let’s remember, as Greg points out, that we are still in the midst of the longest economic recovery in U.S. history.
That’s not to say that everything’s rosy and growth will continue. Certainly, many investments have become over-valued. Some of those valuations in the lead-up to this correction were unrealistic.
But that’s no reason bail. Sure, there are some investments that have been exposed, but overall, if you’re willing to look at a slightly longer time horizon, they still offer real upside.
I think the most important advice at moments like this is take a deep breath. If you sell now, you lock in losses.
It’s best to let the dust settle and make a smart plan as the reality of the market becomes clear.
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