Markets make a significant comeback

BY: FAZAAD BACCHUS 

As you are all well aware by now looking at your 2018 investment statement, it was not a very good year. This was probably one of the worst years when it comes to returns since 2008. Yes, you have heard it before, that it’s all due to the China trade wars, NAFTA agreement, and rising interest rates. These are not things that anyone can predict, and no one could have prepared themselves for such a negative performance in 2018.

Matter of fact all the fundamentals looked quite good, housing starts were up, unemployment was low, GDP was high and all the right conditions for another great year. But remember I mentioned some time ago about a thing called exogenous shocks, things we cannot prepare ourselves for? Well, those were culprits and the cause of such a weak market in 2018.

As we head into 2019, these fundamentals ever present in 2018 are still there. Yes, there has been a cooling of sorts but still strong. Does that mean we are heading for a great year or another like last year? The truth is, no one knows, and no one can predict the stock market, it is a living breathing thing. It heaves and pulls back just like a person breathes and perhaps if we understand it like this, we may come to terms with the way it operates.

The stock market is never stagnant, just like a tide that rises and falls. Then it is better to accept that this is the way it does what it does and there is absolutely nothing anyone can do about it. However, it is a given fact, if you stay in the market long enough, choose good investment managers and continue without the weight of the market on your shoulders, you would more than likely come out a winner.

To emphasize this point let me share what happened in the market in 2018. Not a single index made money; the TSX was down 8.9%, Russell 2000 was down 11.01%, DAX was down 22.16% etc.etc. Not a single stock exchange reported positive gains last year. So, at the end of 2018, some investors decided to liquidate their investments. This is a typical strategy for some investors referred to as loss aversion; they cannot afford to suffer any more losses. And then they miss the best days in the market!

I refer to the month of January 2019 where the stock market gains were so high that it has almost recovered all of the losses of last year. But if you were not in the market because you liquidated at the end of December, then you would never see those gains. This is the way it works folks, you have to stay invested, but don’t get me wrong, you must also find a good advisor, a good fund manager and be invested in the right funds.

What does the market have in store with such a good rebound? Do we expect significant growth over and above the gains in January, it’s very hard to say, but for me, it’s not likely. January provided an average of about 8% and it’s not possible that we will see this happening every month from here on. Therefore, I urge you to find a dedicated advisor to help you manage your investments.