Despite the arrival of sunny summer days, it feels like we’re living through more doom-and-gloom than ever.
The spectre of nuclear war in the Ukraine floats through our news reports. Wildfire smoke is altering our daily routines, forcing us to confront the stark reality of climate change like never before. And the kicker? On July 12th, the Central Bank of Canada raised interest rates yet again, by 25 basis points, to 5.00% – a new 22 year high.
Although inflation appears to be coming under control , many Canadian investors are stressed out. Variable-rate mortgage holders are suffering due to the tremendous rate increases as the bubble on cheap mortgages has burst, and homeowners fear their rates will remain high for years to come.
When debt servicing costs rise, consumer and market confidence declines.
Where does this leave the investor? Anyone that has borrowed money and is paying higher interest rates on their debt is not only pinching more pennies, but they are becoming concerned about the viability and productivity of their investment strategies.
Where once we felt confident and stable in our world – and our investment portfolios – today, there is a collective sense of unease.
“Is investing my money in these uncertain times a gamble? Should I hold my cash for a rainy day? Should I focus more on GICs or anything with a guaranteed return? Should I wait for the market to rebound before investing?” We hear these questions frequently.
First, take a deep breath and exhale. As we wrote in a previous blog, making safe investments in dangerous times requires a long runway, or time horizon, for your portfolio to take off. The first thing to do is recognize that turbulence in the markets is transitory, and if history is any indication, we will face even sunnier days ahead if we can weather this current storm. So stay strong, stay disciplined, and don’t panic.
Second, remember that investing is a long-game, not a short game. Sound investing is not a track-meet where you get rich quick; it’s a marathon where gains are accrued steadily through strategic long-term planning that overcomes momentary fluctuations of the market. The consistent investments you make in periods of anxiety and low growth means that your portfolio will participate with the market when it recovers.
Third, let us develop a bespoke financial plan and investment strategy that can put your money to work for you in ways that meet your level of comfort today, and your family’s needs tomorrow. Consistent investment in the short-term can translate to gains and growth in the long-term. The days move slowly, but the years move quickly.
Let’s keep calm and carry on.