It seems like we live in a world of abbreviations. There are so many abbreviations that it can be difficult to keep track of what they mean. Some organizations have even resorted to creating glossaries of all of the abbreviations that are used to name various different divisions, sub-committees and projects. I could certainly use such a glossary to understand some of the texts that are sent by the next generation. Urban Dictionary becomes a handy online source for deciphering some such texts.
In addition to using the first initials to create abbreviations, we also have "shipping" which blends together various words to imply a relationship between them. Hence, we arrive at events such as Brexit which leaves everyone wondering "what’s Nexit?"
Based on the above, I’d like to add a new acronym, "WHYDFML?" Would someone please add this to Urban Dictionary? It stands for What Have You Done for Me Lately?
In previous blogs I have discussed that we have been positioned into investments that increase in price when the stock market declines. We were not doing this because we had an inside scoop on the way that Brexit was going to materialize. The polls were 50/50 between stay and go as the British went to the polls. Every talking head had an opinion as to what was going to happen but no one knew with 100% certainty what the outcome would be.
We were positioned defensively because all of our trading strategies were pointing in the same direction. Economic growth has been slowing and the conditions have favoured government issued bonds as opposed to stocks. If you look at the past two years, the Canadian stock market has declined and longer term bonds have increased in price. In the U.S., the S&P 500 has been a roller coaster ride for the past year-and-a-half and being in bonds at various times has been a better decision than being in stocks.
Economic conditions are not easily measured. However, having the right tools in place allows us to understand when those conditions are shifting. When economic conditions shift positively it is a lovely time to be invested in stocks and everyone is (relatively) happy. When those conditions shift negatively, people become dissatisfied; economies, governments and companies can become fiscally squeezed and the results are large, events that roil markets. There is a heightened probability that these can be political events as well as economic events. The media becomes full of doom and gloom and some investors do the wrong thing at the wrong time.
On June 24, the morning after the Brexit vote, the stock markets around the world declined and investors flocked to safety. Safety means government issued bonds. By already being positioned into those bonds, we had quite an impressive move upwards for our clients. We have used this as an opportunity to lock-in gains and re-balance portfolios. It has been a very busy time as we have acted quickly to the benefit of our clients. WHYDFML? We have guided our client portfolios with a steady hand through some very turbulent markets with the results being superior, long-term, risk-adjusted returns.
If you are reading this and you are not currently invested with us, please review the trading of your portfolio in the past few years and ask your advisor WHYDFML? Then come and see us.
BTW you can reach me @ 519-780-4171 or Matthew.Phillips@RichardsonGMP.com
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