I will Say It Again: Risk Is High And Rising!

Yesterday, just as we were about to go live with our weekly client webinar, the President of the United States, arguably the most powerful man / nation in the world, stated that if North Korea persisted in continuing its threats toward the US, that they would be met with "fire and fury like the world has never seen" (Game of Thrones meets Reality TV).

My business partner Paul saw the headline come across his Bloomberg terminal while we were discussing risk (how appropriate) and as one of our clients noted in their feedback to us, "seemed reasonably distracted". Yes, indeed.

We spent a little bit of time on our call talking about the lack of volatility (the VIX index close to its lows) currently in the financial market place which shows the general level of complacency surrounding investors at the moment.

Not since 2015 have we had a serious spike in volatility:

I remarked that, at that time, when volatility spiked, our phones were ringing off the hooks with folks who were frightened by the situation, looking for answers and assistance. Now, a great deal of folks have put their financial and investing risk issues somewhere back to number 5 or 6 on their priority list, because they do not feel any urgency to act.

Paul, on our call yesterday, said very succinctly that: "the time to address risk is now", not when it scares the daylights out of you, by then, it is too late. 

Lucky for our clients, we are always analyzing and measuring  the level of risk and adjusting our portfolios accordingly so that when that next big spike in volatility comes (and it will), we will be prepared (and that, as discretionary portfolio managers, we have the ability to get everybody out of the way of danger instantly and simultaneously, something you won't have with a non-discretionary portfolio manager, who will have to call you first).

Will it be now? With the political posturing between the US and North Korea escalating? Perhaps. Or it could be when a few large holders of equity assets determine that valuations just don't warrant as much risk as there is at current prices. Or perhaps the rising interest rate policies in Canada and the US strip enough liquidity out of the monetary system that selling assets for some becomes necessary.

Or it could be a combination of all three. 

When the very tightly wound elastic band snaps back, it will have some significant repercussions.

Best be prepared.