Should Investors Worry About Stock Market Changes?

Since the beginning of the year, the Dow Jones has fallen 9.25%, the SP 500 by 13%, and the Nasdaq by 21.5%. The tech-heavy index also had its worst day since 2020 on Thursday with a 5% decline.

Rising inflation, rising interest rates and lingering problems in supply chains point to a stock market crisis?

Three experts were invited to the show Facts first alternate between optimism and pessimism on the issue. However, they agree on one point: “rebalancing” your portfolio can be wise in the current situation.

A “lasting” crisis

Georges Ugeux, former international vice president of the New York Stock Exchange, yields a perfect storm for the global economy – a tornado where it will be difficult to recover.

If we look at the impact of the war on Ukraine, the very high and very bad management of inflation and the rising interest rates, we are clearly heading towards a difficult time to manage, as we will consider. the effect of these different elements on each other.

One is now president of the company Galileo Global Advisors asserted that the current situation is more worrying than the financial crisis in 2008 because it is a crisis more. all in all.

Whether in energy or because of supply problems, inflation is being felt around the world. A consequence that Georges Ugeux attributed to the decisions of central banks and Western governments.

According to the expert, central banks made a mistake during the pandemic by keeping interest rates too low for too long, which had the effect of boosting demand for goods and services, without a corresponding increase. in supply.

Georges Ugeux qualifies the interest rate increase as needbut D ‘inadequatebecause war and supply chains are collapsing phenomena outside the areas of intervention central banks.

Public authorities with the power to intervene have rest is somewhat limited, he recalled. The investment banker accuses states of spending too much money, too quickly during a pandemic.

” Of course, [les gouvernements] will take emergency measures, but it’s time to ask about the completely irresponsible way in which States spent and used the debt. “

He was judging unavoidable the subsequent stock market correction, after a decade of stock market growth.

Governments, he said, have survived in a cloud believes this growth will continue. This is now quite the opposite that could happen, according to Georges Ugeux, who predicts a lasting crisis .

This is why the latter not sure if now is the right time to enter the markets.

For those who already have investments, he recommends consulting their adviser to avoid having an asset too speculative. Now is really the time to have a good balance between stocks and bonds.

A conjuncture rather than a storm

If they are likely to agree with this recommendation, Jean-René Ouellet and Fabien Major do not share Georges Ugeux’s dark warning on the state of the economy, even if not in the Canadian context.

Mr. Ouellet, who is an investment strategist at Desjardins, allayed the latter’s fears about the rising cost of living. If commodity inflation is expected there is still time left goods inflation should return to target level while Canadians use their surplus savings, he said.

He also said that the stock markets have really experienced shocks over the past ten years. Claiming otherwise, as Georges Ugeux suggests, is equivalent to put your head in the sand.

You should remember that in 2018, we had an American president who put tariff barriers against everyone, especially against China, Germany and other European countries, we had the SNP 500 that failed […] It is a natural part of markets to deal with shocks.

” We’ve had shocks, there will be other shocks, that’s for sure. “

Fabien Major, Financial Wealth Advisor at Assante agrees.

It is not accurate to say that there is continued growth for 10 years, he said, citing as an example the Canadian recession caused by the collapse of the oil barrel in 2015 or the economic recession caused by the pandemic in 2020.

Both analysts believe Canada’s economic problems are more ad hoc than structural.

Sure, there is a conjunctureconfession of Mr. Major.But [pour] a perfect storm, there will likely be more unemployment, there will likely be higher interest rates, and there will need to be no profitability within the companies. But this is not the case.

Jean-René Ouellet was second in this review, citing as an example the unemployment rate in Quebec, which reached a historic low in April.

There has been almost no recession without unemployment [or] at present almost no employer we speak to is willing to lay off an employee.

He added that the profitability of Canadian companies has changed upwards since the beginning of the year, despite perfect storm mentioned by Georges Ugeux. And if true that Ottawa ran deficits astronomical during the pandemic, Canada’s economic performance meant that the weight of [sa] debt does not increase.

Despite the economic hardship, Jean-René Ouellet believes we should remain calm.

He acknowledges that the stock market corrections of approximately 12 to 20% observed recently are likely to worry investors with a more cautious profile, he recommends that investors stay. balance at miscellaneous in their portfolio, and above all government [leurs] performance expectations.

He pointed to interest increases generating better returns on bonds.

The money I invested in bonds less than 1% at the beginning of the year, I can now invest it at 3.5%, 4%.

It’s not exciting, but it’s more interesting.