Stock indexes worldwide have suffered a correction recently. Although this is a normal occurrence, we understand that such a situation can cause investor uncertainty. There is no reason to be overly concerned, however, since in the current environment, we believe this market decline will create attractive buying opportunities for stocks.
During the first week of October, the chairman of the U.S. Federal Reserve (Fed) reiterated the Fed’s intention to continue raising interest rates at a pace that may push rates past neutral. This statement provoked the following series of events:
- Yields on U.S. Treasuries with maturities of 10 years or more rose quickly.
- This increase led to an adjustment in investors’ target price for stocks.
- Heavy selling of stocks occurred, which accelerated on October 10.
- Stock indexes fell worldwide.
What are the positives that can be taken from this situation?
Here are some factors that suggest to us that the current environment is still favourable for stocks.
- S. inflation was weaker than expected in September, which could prompt the Fed chairman to curtail his plan for further rate hikes.
- The overall economy is doing well and companies are still generating solid revenues.
- The U.S. economy is at full employment and labour is also hard to find in Canada.
- Such a pullback is healthy for the markets and creates good buying opportunities that we intend to capitalize on.
How does our investment philosophy protect you?
Periods of instability like the one we are now experiencing can test investors’ nerves. Fortunately, our investment philosophy and our investment process enable us to manage the risk level of our portfolios and achieve a certain degree of steadiness.
Bear in mind also that all of Professionals’ Financial’s managers and investment products are chosen for their ability to weather periods of high volatility.
As an investor, you should continue to follow your investment policy, as defined according to your investor profile. It is also recommended that you stay the course and not make any hasty or emotional decisions on anything concerning your investments. As always, our portfolio managers are keeping a close eye on the markets and are ready to react if need be.
Have questions on the current situation? Don’t hesitate to contact your wealth management advisor.
François Landry, CFA
Senior Vice-President and Chief Investment Officer