What is Whipsaw?
by Shelly Appleton-Benko | May 12, 2022
Why is it that everything that is good for you, is often also painful? Exercising, eating healthy, paying taxes and, of course, riding out market corrections. Yes, you heard me correctly: market corrections are healthy and can be good for you over the long term. Equity markets are designed to balance between risk and reward. In 2020 and 2021, the scales were tipped in one direction only: up. At that time, reviewing our monthly statements was satisfying and not painful at all.
However, too much of a good thing is not a good thing. It is important to note that companies don’t grow their earnings by 20% in one year under normal conditions. So, why have we come to expect these type of returns? Houses should not increase in value by that margin either, yet many homeowners are anxiously opening their property assessments in anticipation of their net worth going up, without having done anything to contribute towards it.
Let’s return to the question in the title of this note, “What is whipsaw?” A trader is considered to be “whipsawed” when the price of a security they have just invested in abruptly moves in the opposite, and unexpected, direction. Whipsaw patterns most notably occur in a volatile market in which price fluctuations are unpredictable – similar to the circumstances we find ourselves in now.
The current market volatility is unnerving, and leaves us with many unanswered questions. The exact answers are unknown, and that is why the ups and downs of this market may seem particularly painful. However, we need to adjust our expectations and understand that 2022 has become the year of change. We all listened to the experts who told us that markets were frothy and inflation was coming. Today, we are faced with a changing investment environment that creates opportunity. The timing of these opportunities is currently unknown, but it’s important to remember that they always come around. History has shown us that patience is not only a virtue, but also a key attribute that successful investors embrace. The scales take time to rebalance, and now is the time to exercise patience.
The Practice of Patience | July 13, 2021
The U.S. economy is re-opening, the COVID-19 battle is being won, and the stock market has been experiencing a historic market rally that is leaving many investors wondering what steps to take next. What will inflation be like in the coming year? What are the possible changes to income tax structures — both here and south of the border — and how will that affect us? And of course, how will we end up paying for the stimulus packages of the past year? + More
5 Years in the Making! | June 3, 2021
Wow! Twenty-five years went by in what seems like the blink of an eye. It’s hard to believe that on June 3, 1996, I began my career at Odlum Brown. So much has happened – and there’s so much more still to come!
Milestones like this one are a pit stop in life’s journey, and a great chance to pause, reflect and celebrate some of the lessons learned along the way. + More
Blue Moon | October 30, 2020
Fitting for a unique year like 2020, our Halloween this Saturday will be extra “spooky” as the sky will be lit by a “blue moon.” A blue moon is when there is a second full moon in the same calendar month. Blue moons are rare, hence the phrase “once in a blue moon.” + More
Hire the Gardener | November 6, 2019
As the seasons change, many of us will spend time raking the leaves and pruning back the shrubs in order to keep our landscaping orderly and healthy. So too, as Investment Advisors and Portfolio Managers, we now revisit portfolios through the lens of preparing for year end and future conditions. In particular, we focus on the capital gains and losses for non-registered accounts. + More
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Shelly Appleton-Benko is a Vice President, Director and Portfolio Manager at Odlum Brown, with expertise in strategic wealth management. She has over 25 years of investment experience, helping affluent clients build, preserve and transition wealth. Shelly’s investment philosophy focuses on high-quality companies with strong management teams and growth potential. She places a priority on owning mid to large-cap companies with dividend payment streams. You won’t find any penny stocks here! Portfolios are created with a custom blend of individually traded securities in diverse sectors listed on major indices such as the Dow Jones Industrial Average, S&P 500 Index and S&P/TSX Composite Index. Where required, Shelly maintains a fixed income portion of the portfolio by tailoring a blend of corporate bonds, preferred shares, GICs or short-term money market products. Overall, Shelly ensures you always know what you own and why. + Learn More
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