Choppy markets can lead to buying opportunities.
And you should urge clients to take advantage of those opportunities, says Colum McKinley, even though market volatility is unpleasant to go through in the short term.
McKinley is vice-president of Canadian equities at CIBC Asset Management and manages the Renaissance Canadian Core Value Fund.
They can do this “by accumulating or adding to positions in well-managed companies that have more attractive valuations.” He notes his process hasn’t changed in the face of unstable markets, and he suggests more investors should stick to methods that have worked for them in the past. Even now, they need to adopt longer-term perspectives, adds McKinley.
“If you think about the last 10 years,” he notes, “the total return of the S&P/TSX [has been] in excess of 8%, and that’s as of the end of September 2014.” Yet that period includes “the credit crisis in the U.S., the debt crisis in Europe and natural disasters. We’ve seen a lot of problems that have contributed to volatility but, over the long term, the return of the TSX has been quite strong.”
Today, people have become more concerned about the growth rates of both Europe and China, but “at the same time, [investors] continue to see a positive and improving economy in the U.S.,” he adds. “[But many] have continued frustration at the pace of that recovery.”
Still, “as people shift their near-term views on [global] outlook[s],” says McKinley, “it’s important to remember we had a very long, sustained rally in stocks.”
For the U.S. market, in particular, we’ve experienced “the third-longest period of time without a 10% or more correction in stock prices. Valuations have moved from being exceptionally cheap to trading at around their long-term averages, [and then], for many stocks in many sectors, to trading at above-average valuations.” So, you’ll have to dig to find reasonably priced names.