Well, October arrived and with it -predictably- a more pessimistic tone to stock markets. Weaker economic numbers are behind this, prompting fears of a global slowdown. Central Banks around the world stand ready to cut rates to stimulate growth, and notably the US Central Bank has already lowered its key Discount Rate once this year.
So does this mean the great Bull Market which started over 10 years ago has run its course? Perhaps, though moves by Central Banks could serve as a stimulus to the markets, extending the rally further. Our view is that this is an inflection point and the balance of probabilities suggests that uncertainty will weigh on markets and we are likely to see more days in October than not where stocks trade lower.
Our approach to portfolio management has always been to balance capital growth with capital preservation. This is done through the inclusion of government and corporate bonds and yield-focussed equities such as are found in the Mackenzie Diversified Alternatives fund. These positions mitigate market downside, as each of these asset classes have low correlations to equities. Further, we have been very selective in partnering with wealth managers including Dimensional, Edgepoint and Mackenzie, who have consistently delivered through all market conditions.
I said this before, but volatility equals opportunity. Market downturns allow your institutional money managers the chance to buy great companies trading at a discount. Inevitably markets come back (they always do -a perfect track record) and buying in when stocks are cheap magnifies upside returns over the long term.
So focus on the Turkey, Ham or whatever you’re planning for the upcoming Thanksgiving weekend and know that your money is in safe hands.