Current Market Conditions

In light of recent market events, we’d like to update you on our perception of current market conditions.



Also remember that our methodology is based on developing a strategy and patiently (and cautiously) building portfolios that will minimize the impact of volatility over the long-term, allowing for more continuous growth.



In some cases this may require a longer period of building while we try to maximize the value of the individual holdings, utilizing short-term volatility in the markets to get the best possible prices. As we have explained before, but wish to emphasize: our strategy is to put purchase orders (for our clients) in below the current market prices so that in the event that market volatility allows a move to lower prices, our orders are executed, providing better value.



We believe that statistically, prices will eventually revert back to the mean and we use the 200 day moving average (for each security) as our guide. Currently, most (if not all) of our securities (that we buy for clients) are trading well above their 200 day moving averages. This is in fact a rare occurrence (anomaly) in the markets.

Bond prices continue to move higher (yields lower) and at the same time equity prices are moving higher (as well as commodity prices, especially gold). Bond prices are moving higher as the demographic (retiring baby boomers) seek to capture more secure yield (income) for their investment strategy.

At the same time, central banks in the developed economies that are facing economic stagnation, (Europe, US, Japan) have pledged to buy bonds to continue the monetary stimulus that they believe is necessary to keep the economies from deflating.



While bond yields move lower, this makes dividend yields (from common and preferred shares) more attractive and investors are pulled towards equity markets to take advantage of the better yields. Hence the recent rise in equity prices.



We do not expect this situation to last, however the timing of the next move is uncertain. We had anticipated the economic uncertainty to give way to more volatile markets in September and October, but so far, with the central banks providing comfort for the markets, this has not developed.



And as the famous economist, John Maynard Keynes once espoused: “markets can remain illogical far longer than you or I can remain solvent”!



Again, our methodology for building portfolios is based on patience to get the best possible value for our clients. To discuss your portfolio in detail and the implications for your current situation, we are available at your convenience, so please call Matt Watson or Taryn Ashby (1-800-438-3319) or by email mwatson@wellwest.ca , tashby@wellwest.ca and set up a time to come in or chat with us by phone and we will happily take the time for a review.



Garth Turner

Scott Tomenson



http://www.turnertomenson.ca/