Start the Car again – this deal is too good to be true

Have you looked at your investment statements lately? Or have you just thrown them in a drawer unopened, knowing that things have been on a downward trend? Or worse yet, are you checking the values online every morning, stressing about how low they can go?

Recently, I’ve seen market prognosticators (well-known firms and individuals in the financial space) predict anywhere from an additional 20 percent decline up to a 40 percent increase by the end of the year. I’ll let you in on a little secret – nobody knows what’s in store. Not even me. 

Most of us in the industry have our own views on what the short-term will bring. But those of us who are smart take our own short-term views with a huge grain of salt and put a much greater emphasis on our long-term outlook. It’s only when we look at the long term that we can have any kind of reasonable assurance that we are on the right track. 

Recently I wrote a market letter to clients regarding the current status of markets. I’ve included an excerpt that you may find valuable:

“Admittedly, this has been one of the more unusual market declines I have experienced… 

This decline has been one of a thousand cuts.  

“Rather than a single event causing a bubble to burst, I’m more inclined to liken this financial environment to a balloon that is slowly deflating. Quite frankly, I thought we had hit the capitulation phase a few weeks ago. Clearly, I was wrong as this past week saw further deflation of the balloon.  

“Are we at the bottom now? While I can’t say with absolute certainty that we are at the bottom, I can say with confidence that if we’re not there yet, we are at least somewhere near the bottom.”

Blue Light Special on aisle DJIA 

“I don’t say this very often. In fact, it’s so rare that I’m a bit shocked to find myself writing a letter like this twice in the same decade. The last time I wrote about the markets being a great buying opportunity was on March 16, 2020, with a follow-up a couple of weeks later on April 2. Back then I wrote: 

‘While it’s always possible they could go down further, I believe we are at or near the bottom and equities are on such a deal that investors should load up as much as they possibly can. This is a “START THE CAR” kind of sale.’

“I’m happy to share that the investors who took my advice then and added to their holdings were handsomely rewarded. Since then, the Dow has increased by about 50 percent – and that’s after accounting for the recent drops.  

“We are being given another rare opportunity to buy stocks while they’re on sale. Take a leaf from IKEA’s book  – don’t miss out and “Start the car!” 

“Could we still see another drop of 20 percent? Anything is possible… Dr. Jeremy Siegel, one of my favourite authors and market prognosticators, was recently quoted on CNBC as saying, ‘If you have cash, begin to deploy it’ and that investors ‘won’t be sorry’ a year from now if they do.  

“Earlier this year, Warren Buffett started deploying some of his company’s enormous cash pile (I think the pile got as high as $147 billion at its peak), making multi-billion-dollar investments in a handful of companies – some private, some public. We won’t know until regulatory filings are made, but it’s a good bet that he is continuing to buy at these lower prices. Warren is known for saying, “Be fearful when others are greedy and greedy when others are fearful.” 

“So, what should you do? Frankly, probably nothing, but:  

1. If you have cash, deploy it. Yes, investments may decline further, but as I said above (and backed up by my buddy Jeremy Siegel), a year from now you are very likely going to be very happy you made the decision. Investments are on sale. 

2. This second option comes with a HUGE warning. You could review your comfort with risk and kick around the idea of moving up the risk ladder by a rung or two. Be extremely careful with this though. It is only something you should do if you can BOTH:  

a. afford the risk, AND  

b. sleep at night with the risk.”

If you’re interested, you can read the full letter at www.visionvest.ca/articles-and-letters by scrolling down to Market Letters and clicking on the June 2022 link. 

As I mentioned earlier, no one (not even me) knows what the future holds, so I can’t recommend strongly enough that you talk to your financial advisor if you want to consider either of the options above. These options may make sense for you, but they also may not. Your advisor should know your unique set of circumstances and be able to guide you toward the right decision for you.  

Arnold Machel, CFP® lives, works, and worships in the White Rock/South Surrey area. He is a Certified Financial Planner with IPC Investment Corporation and Visionvest Financial Planning & Services. Questions and comments can be directed to him at dr.rrsp@visionvest.ca or through his website at www.visionvest.ca. Please note that all comments are of a general nature and should not be relied upon as individual advice. The views and opinions expressed in this commentary are those of Arnold Machel and may not necessarily reflect those of IPC Investment Corporation. While every attempt is made to ensure accuracy, facts and figures are not guaranteed. 

Arnold is now accepting a limited number of invitations to speak. If you are interested in having him speak to your congregation or other group regarding money matters, please contact us at admin@visionvest.ca or (604) 542-2818 with your preferred date and time