Different Makes a Difference

The Odlum Brown Research Blog

Accept Market Volatility & Stay Focused on Long-term Goals

By Murray Leith CFA, Executive Vice President & Director, Investment Research
Wednesday, August 26, 2015

It’s no fun watching stocks go down and the value of your portfolio deteriorate. Nonetheless, it happens. Markets are volatile and successful investors appreciate that stock prices are unpredictable, particularly in the short run.

The latest bout of investor nervousness is being driven by concerns about global growth. In particular, people are worried about China. We share those concerns. We now believe that slower growth in China and emerging markets will counteract improvements in the developed world, such that the hoped-for acceleration in the global economy will not occur. Rather, we believe global economic growth will continue on a muddle-through path.

Importantly, we do not expect a global recession. Not only do we not see the widespread excesses that typically drive the economic cycle, but global monetary policy is far too accommodative to be overly pessimistic.

Corrections are a healthy and normal development, and the only unusual thing about the current episode of weakness is that it has been an extraordinarily long time since markets experienced a meaningful downturn. In other words, markets were overdue for a setback.

Those who accept market volatility invariably do much better over the long term than those who try to anticipate market corrections.  

We see no reason to alter one’s long-term asset mix and associated commitment to equities. While many will be tempted to time the market and try to figure out what will happen in the near term, we are focused on the potential for the businesses that we like to be bigger and more valuable over the long term. Our portfolios are concentrated in companies that do best in a slow-growth world.

For further insight, watch this recent interview with Stuart McNish, host of Conversations That Matter. 

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