WEALTH Matters — WINTER 2009

Investment Market Commentary

2009 began with widespread fear about the safety of our money and the banking system, and ended as one of the strongest stock market performances in recent memory. This sort of a sharp rebound is typical as investor panic is replaced by a more balanced outlook as the economy finds a new balance.

 

 

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Investors who stuck to their long-term strategic asset allocation were rewarded for their patience with a sharp rebound. Those who abandoned their allocation at the bottom locked in their losses and missed the opportunity to catch the rebound. That’s not to say that those who stayed the course are better off than they would have been had they sold at the top, although very few would have been able to determine where the top was until after the sharp drop occurred.

Staying the course with a strategic asset allocation means investors will experience some periods in which a measured rate of return is negative, but over the long term these periods average themselves out, and equities typically outperform bonds and GICs over longer measurement periods.

We’ll likely see continued slow growth as the recovery takes hold. For more information see our article on Economic Outlook (link below).

The past couple of years have seen the highest levels of volatility in stock markets in many years, and the first time in 20 years that a 10-year holding period has shown a negative return (when measured to the market low point).

By the end of 2009 the TSX index had recovered more than half its 2008 losses, and even the Dow Jones Industrial Average index had returned to a positive 5-year return, although barely.

With foreign assets, the rise of the Canadian Dollar vs the US dollar has depressed returns in C$ terms.

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