First the ‘good news’…equity markets around the world (in general) are higher now than they were three months ago resulting in a rebound for most clients.
Now the ‘bad news’…equity markets around the world (in general) are close to where they were January 1st, 2015 (almost 19 months ago)
As you can see (if you squint real hard J) since the start of 2015 the following has occurred:
SP500 (US market) is up about 5%
TSX (Canadian market) is slightly negative
EAFA (Europe, Australia and the Far East are slightly positive.
CDN$ is down 10% versus the US$ (though up about 5% year to date)
However short term (and yes 18 months is short term) are not what investment decisions or reviews are based on. For that investors need to have a longer time frame and I strongly suggest that at least 5 years is used. The following chart shows the same indices over 5 years (ending Friday).
Over the last five years the returns are as follows:
SP500 is up 67%
TSX (Canada) is up 11.76%
EAFA (Europe, Australia and the Far East) is up 40%
As you can see over a five year period equity returns have been much higher than investment grade fixed income.
Enough about history…what about the next five years?
While that is almost impossible to predict I do know one thing…Government bond yields and GIC’s are at all-time lows. If you lend the Canadian government money for 10 years you will receive just above 1%. If you lock your money away with a bank for 5 years your will receive about 2% BUT have no access to the principal.
Over 5 year+ time frames I believe that a diversified portfolio will achieve total returns much higher than this and protect you from eroding your capital as cash flow needs cannot be met by the low interest rate environment.
For those of you concerned about ‘the Trump effect’ I wanted to let you know that your CORE positions such as CI Signature Global Income & Growth as well as Sentry Portfolios are holding higher levels of cash as well as exposure to GOLD BULLION. In fact CI Signature Global Income & Growth has a 10% weighting in Gold at this time.
Signatures view is that most of ‘Trump’s policies are inflationary and gold is an asset that often does well with inflation.
I encourage those clients who I have not met with or talked with during the last 90 days to arrange a review meeting.
The views expressed do not necessarily reflect the opinion of Argosy Securities Inc. This does not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors. Please consult a professional before making an investment decision.