During periods of market volatility, friends and family often ask – “So Keith, how are you doing? You and your team must be fielding lots of phone calls and emails from clients worried about their investments?” Actually, not really. We might get the odd new client reaching out to see if there is something that we should be doing, but that is a very natural reaction based perhaps on their previous relationships with forecasting-type advisor firms.

Our longer-term clients who have embraced our investment philosophy typically have a pretty good understanding as to what we will do. In fact, they can almost predict what we will say:  near-term market swings are unpredictable, ignore the media and market noise, you have a plan, give it time to grow, your portfolios are diversified and rebalanced to their long-term plan on a regular basis. They know that we will not be trying to come up with a story of what needs to be done next in an attempt to outsmart the market.

The truth of the matter is that our clients and our team have invested lots of time and energy together over many years in annual meetings, phone calls, and updates to learn more about the critical factors for long term success. We talk about what to do and what not to do. It takes time, energy, and commitment by all parties. Our clients are serious about their financial affairs and are engaged in this investment approach and philosophy. I tell my friends and family that the outcome for our clients is better long-term returns with more peace of mind and meaningful personal financial outcomes.

Volatility is something that we cannot control. Predicting market movements is something we (and the entire investment community) cannot do. We would rather focus our energy on things that we and our clients can control – such as asset allocation, portfolio factors, understanding necessary savings rates for accumulators and sustainable withdrawal rates for retirees, diversifying broadly, keeping overall portfolio costs low, and minimizing taxes.

So what is happening now?

Last week (Thursday, Feb 8th to be exact), the S&P 500 fell into market correction territory declining -10.15% since the market high of Jan 26th, 2018.

On Friday Feb 2nd, US wage growth figures were released and came in higher than expected. This seemingly good news for workers and the economy was ultimately not good news for equity markets as this amplified the chances of increased future interest rates – which ultimately spooked the market.

Perhaps the biggest surprise of all was not that so much volatility materialized last week, but rather the lack thereof over the past two years. We have gone through an incredibly calm two year period. Volatility was bound to re-enter our investment world.

While market instability can stir emotions, maintaining a longer-term perspective always makes the volatility much easier to handle. Whether we like it or not, market turbulence is part of long-term investing. One important lesson to take from the history of such destabilizing events is the following: This, too, shall pass.

With that lesson in mind, let’s examine how our model portfolios have performed, as well as review how markets have responded to increased volatility in the past.

1: How have our model portfolios performed?

The year started off with a very strong surge in US & International equities and portfolios peaked Jan 26th, 2018. Technically the correction is measured from this date. Year to date returns however reflect performance since Jan 1st, 2018.

TMA Model Portfolio Returns

(Actual client portfolios may differ due to slightly different allocations. Returns are before TMA management fees)

 2: Recognizing the unpredictability of markets.

Below is a list of 31, weekly 5% (or more) market declines dating back to 1980. We can see just how unpredictable market returns are one week, four weeks, and 12 weeks thereafter. These dates include many events that stirred market uncertainty at that particular time. Some events were market-related while others were financial or geopolitical. Bottom line – at each of these moments, patient and disciplined investors did best.

S&P 500 weekly 5% or more drops (since 1980)

3: The length of market corrections is unpredictable

Each market correction (like each bear market) has its own set of characteristics (e.g. what triggered the volatility, the depth and length of the correction, etc.). Some corrections lead to bear markets while most do not. Below is some information on the eleven corrections (or minor corrections) that have occurred since the 2008 bear market. While never particularly enjoyable to live through, market corrections are a part of long-term investing. Investors that stayed patient and committed to their long-term plan witnessed the S&P 500 earning 119% of cumulative returns from March 19th 2010 to last Friday’s market close.      

S&P 500 corrections and minor corrections since the 2008 bear market

So where do we go from here?

There is good news and bad news. The bad news is that no one really knows. The good news is that we do not need to be able to predict market movements to create a long-term successful investment experience. Commitment to your long-term plan has and will always produce the best results.

A recent article in The National Post provides some sound advice to investors; don’t pick stocks, stay fully invested, and don’t time markets. The article, Why are stock markets falling? No one knows. What should you do? Nothing is available to read here.

Thank you for your confidence in us. We hope that you find this email informative and helpful. Please do not hesitate to contact us should you have any questions. We are all here to help.

Yours truly,

Keith Matthews


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