IS THIS ARMAGEDDON OR CAN I RELAX?

Earlier this month, an acquaintance asked
me about all the market volatility we’ve
seen this summer. He wanted to know if
he should stay relaxed…or if this was the
beginning of a financial crisis. After all,
he pointed out, inflation has skyrocketed
this year. Interest rates are on the rise, and
the media is constantly talking about the
possibility of a recession.

How can an investor stay calm in these
turbulent times?

In response, I asked him if he remembered
early 2020. Who could forget? COVID-19
spread across the planet like wildfire.
Stocks plunged into one of the fastest bear
markets in history. At one point, oil prices
were actually below zero! So many things
happened in so short a time, it seemed like
financial Armageddon.

But it wasn’t.

By the end of spring, the markets had
largely recovered – and investors who kept
their heads, stayed calm, and held to their
long-term strategies got in on the ground
floor of an incredible bull market.

It’s true that there is a lot of uncertainty in
the markets right now. Inflation hit 8.1%
in June. In response, the Bank of Canada
raised interest rates by 100 basis points,
the largest single rate hike since 1998. And
with so many Canadians in debt and home
prices plunging, it’s hard to feel confident
about what the future holds.

As uncomfortable as this is, though, none
of it is new. The events we’re seeing are
important, and they unquestionably
have an effect on how regular Canadians
like you and me live our daily lives. But
as long-term investors – which we are –
periods of market volatility and economic
uncertainty are just sequels to movies
we’ve already seen before. And just as in
early 2020, investors who stay patient and
relaxed will benefit in the long-run.