Views on recent market volatility

Given the recent market volatility, investors should not let the recent uncertainty because of short-term effects hinder their decisions; investors should stick to their initial investment plan. History has shown that any sudden dip or weakening of the markets usually causes a rebound afterwards. Investors are better off staying the course and endure the full market cycle by sacrificing the present difficulties in order to gain on the long-term recovery. Certain professionally managed solutions provide diversification; this includes global allocation and asset allocation. Treasuries and the sovereign debt of higher-rated developed world countries which can act as a hedge against the risk while the market takes a downturn. A diversified, value based, multi-sector approach has proven to be a reliable strategy in any type of market.

In a market with this degree of volatility, the professional managers look for companies with discrepancies between price and value. The managers look for significantly discounted valuations where the company has not changed its fundamental business practices and still shows signs of growth with promising potential – a bottoms up value based approach.

During the past few weeks, the markets have gone through a fundamental correction and in the most recent days, the markets have reacted to liquidity and fear. These factors can be caused by sudden news that hits the market and thus, may possibly create strong buying opportunities for investors. These opportunities exist because they create a systematic sell-off as fundamentals are now taking a back seat to sentiment. In other words, these short-term fluctuations create differences between the price of a company’s shares and the underlying value of the stock.

Some of the global managed solutions that we use are positioned to maintain minimal exposure to emerging markets and commodities simply because of the problems that are going on in China. This means that this solution is currently positioned well to handle the current volatile market.

In conclusion, the volatility of today’s markets starts from China’s devaluation of their currency which has led to volatile global equity markets. A recommendation to handle the uncertainty of the markets is to diversify your portfolio across and within asset classes such as allocations to fixed-income instruments. Finally, due to the recent fluctuations in the market, the professional managers target their research on disconnects in the market created by these short-term movements in order to find potential buying opportunities.

With the complexity and volatility of modern global financial markets, it is important to have a financial team with powerful resources who can see the big picture for your financial benefit. The team of professional financial advisors and tax accountants at GTA Wealth Management Inc. has decades of expertise to help maximize your wealth, reduce your risk, and minimize your tax position. We would welcome an opportunity to help you with your financial planning.

Contact or call GTA Wealth Management toll free 1 855 GTA WLTH (855 482 9584) to accelerate your ride to financial independence. A professional wealth management financial advisor is ready to serve your wealth management, tax return and planning needs. GTA Wealth Management Inc. has three convenient locations in Mississauga, Toronto and Markham to serve you.

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