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Equity Market Reminders & Comments

Here are my key comments and reminders:

  • keep in mind in most of your portfolios, you own good quality businesses with healthy balance sheets and long-term track records maneuvering many markets

  • market pullbacks are never permanent, and even if the economies take time to re-adjust, the businesses you own will come out on top as they have time and time again in the past

  • owning quality businesses is one of the key ways to grow wealth over time as it ensures we can grow 3 or more % above inflation every year

Few additional comments on current markets from Myles Zyblock, chief Investment Strategies from Dynamic Funds:

Expectations are for Rates to Peak in the First Half of 2023

  • The futures market has the Fed funds rate peaking at about 5% during the second quarter of 2023. Were the Fed to lift interest rates by 0.75% at their meeting this week, it would imply about another 100-125 basis points of monetary policy tightening to follow before levelling off.

The Labor Market Remains Strong

  • In the latest labor market report, the unemployment rate declined from 3.7% to 3.5% with the help of 263,000 new jobs. For the inflation objective to be achieved, the Federal Reserve believes it will need some help by way of a softer labor market

  • An unemployment rate of 3.5% reflects one of the strongest labor market environments since the 1960s.

Don’t Read too Much into Immediate Market Reaction

  • Sometimes equities rallied on "Fed announcement day" and sometimes they declined. A similar story holds for bond yields.

  • The key for investors is not so much what the Fed does on a given day, rather the read on the expected longer-term trajectory for financial conditions, inflation, and the health of the economy. At this stage, inflation has remained stubbornly high leaving the Fed with little wiggle room to take their foot off the brakes.

The market has faced many economic downturns over time.

Historically, despite many periods of increased volatility, markets have remained resilient.

Recessions, while unsettling, are usually short-lived

The good times (economic expansion) usually last much longer than the bad times (economic recession)

Ultimately, the ride up is usually bigger than the ride down

Many of the strongest returns in the markets occur in the period immediately following a sharp decline. Those who exit the markets, even for a short while, risk missing great opportunities when the markets recover.

Bottom line: Keep your long-term plan in mind, work with an experienced planner and tune out the notice.



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