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Look Beyond the Headlines Thumbnail

Look Beyond the Headlines

At the beginning of 2017, a common view among money managers and analysts was that the financial markets would not repeat their strong returns from 2016. Many cited the uncertain global economy, political turmoil in the US, implementation of Brexit, conflicts in the Middle East, North Korea’s weapons buildup, and other factors. The global equity markets defied their predictions, with major equity indices in the US, developed ex-US, and emerging markets posting strong returns for the year.

Fast forward to today, following October and parts of this month there's a good chance that you have read headlines or blogs or news stories that are predicting doom and gloom for the investment markets.  This can be unsettling, and cause us to wonder whether we should be "doing something about it".  

The chart below offers a snapshot of the Canadian stock market based on the S&P/TSX Composite Index. The headlines should not be viewed as determinants of the market’s direction but as examples of events that tested investor discipline during 2017.

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The chart below highlights some prominent headlines in the context of global stock market performance as measured by the MSCI All Country World Index-Investable Market Index (MSCI ACWI IMI) in 2017. These headlines are not offered to explain market returns. Instead, they serve as a reminder that investors should view daily events from a long-term perspective and avoid making investment decisions based solely on the news.

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The broad global advance underscores the importance of following an investment approach based on diversification and discipline rather than prediction and timing. Attempting to predict markets requires investors to not only accurately forecast future events, but also predict how markets will react to those events. The 2017 markets were a good reminder that there is little evidence suggesting either of these objectives can be accomplished on a consistent basis - definitely not by the news media.

Are the events of the last few weeks an indicator of more difficult days ahead?  I don't know.  In the short term, markets are unpredictable.  In the long term, they have historically rewarded investors who have patience and discipline to stick to their strategy.

Source: Dimensional Fund Advisors Canada


The information in this material is not intended as investment, tax, or legal advice.  Please consult your advisor or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.