Strategist says oversimplifying geographic markets is a mistake
Investors should guard against simplifying geographic markets and following the herd to the US.
Brent Joyce, GLC’s chief investment strategist, said people must do their research and not get caught up solely in local issues. He added that Canada’s bellwether companies, for example, have more to do with the US than what happens domestically.
He said that investors have a tendency to negatively think housing, debt and NAFTA with Canada, and dismiss Europe as a hot mess that is not worth investing in.
“They just get on board with the herd and buy more US equity,” he said. “The same thing happened, and the shoe was the other foot, back in 2004 and 2013. Canada was the world’s darling market.
“We had outperformed the US market on high oil prices and a stable banking sector for the better part of 10 years. I remember in 2013, everybody hated the US. You had the taper tantrum, government shutdown, US government debt got downgraded and advisors were telling me I’m all in Canada, forget the US.
“That would have been a great time to take profits on your Canadian equities and buy some US equities really cheap, especially when you consider the Canadian dollar was trading close to par with the US dollar back in 2012-13.
“These behaviours aren’t new and you’re seeing them out in the market place today when you look at where Canadian investment money is flowing.”
Joyce concedes that NAFTA and trade concerns are clouding things for Canadian investors but that it should only increase their faith in the long-term principles of capitalism.
For those with more immediate goals, equities are, naturally, not for them. However, for everybody else it’s a question of staying the course.
He said: “It’s understanding that capital markets in the long run hand out a rate of return that reflects economic growth, innovation … all the good things that capitalism has delivered for centuries.
“And investors who stay engaged with capital market, stocks and bonds on their own terms, control their emotions, they are going to be rewarded with a fair amount of return over time and I think that’s where a neutral stance allows more people to stay on that straight and narrow rather than being whipped around headline to headline, asset to asset, chasing after things.”