{"id":682,"date":"2016-10-24T15:19:47","date_gmt":"2016-10-24T22:19:47","guid":{"rendered":"https:\/\/chaltenadvisors.com\/blog\/?p=682"},"modified":"2016-10-24T15:19:47","modified_gmt":"2016-10-24T22:19:47","slug":"chalten-investment-review-q3-2016","status":"publish","type":"post","link":"https:\/\/chaltenadvisors.ca\/blog\/chalten-investment-review-q3-2016\/","title":{"rendered":"Chalten Investment Review – Q3 2016"},"content":{"rendered":"

Welcome to the Chalten Investment Review for Q3 2016.\u00a0 \u00a0A reminder first, that the purpose of this review is not to explain why market movements happened in the past, nor is it an attempt to predict what\u2019s going to happen in the future \u2013 rather just a humble characterization of the environment in which we invest and the challenges it poses to individual investors trying to make sensible financial planning decisions.\u00a0 <\/em><\/p>\n

It seems like a long time since we left Q2 bouncing back from \u201cBrexit\u201d inspired volatility.\u00a0 Just following the news over the summer you\u2019d think the volatility should have continued with conflicts around the world escalating, an increasingly ugly US election campaign and looming voting day and no shortage of extreme market calls coming from the financial press.\u00a0 In contrast (and against our best guess at the end of Q2), the financial markets were relatively boring in Q3, registering healthy gains across most asset classes.\u00a0 How is this possible?\u00a0 Has Benjamin Graham\u2019s fabled \u201cMr. Market\u201d been on an extended summer vacation?\u00a0 Doesn\u2019t he at least read the newspaper while on holiday like the rest of us?\u00a0 The truth is that ultimately nobody knows why markets move and where they\u2019re going next.\u00a0 Spending time trying to figure it out is a fruitless exercise. \u00a0For example, we\u2019ve been getting a lot of questions about the impact of the US election and whether it\u2019s worth positioning portfolios to protect against adverse impacts from or to take advantage of election results.\u00a0 The short answer is no, it\u2019s not.\u00a0 The evidence shows clearly that there is no systematic short-term or long-term benefit from trying to bet on the outcome of a US general election.\u00a0 As the good folks at Dimensional Fund Advisors put it in their recent quarterly update, \u201cAt best, any positive outcome based on such a strategy will likely be the result of random luck. At worst, it can lead to costly mistakes. Accordingly, there is a strong case for investors to rely on patience and portfolio structure, rather than trying to outguess the market, in order to pursue investment returns\u201d.\u00a0 We couldn\u2019t agree more strongly.\u00a0 As the media furor rises over the next few weeks it will be as important as ever to stick with your long-term investment plan.\u00a0 <\/em><\/p>\n

We continue to believe the best way to combat risk and uncertainty is to target an asset allocation that is suited to your individual risk tolerance and financial situation and to diversify globally across asset classes.\u00a0 We wrote during Q3 about how <\/em>success is less about hitting home runs and more about keeping out of trouble<\/em><\/a>, and <\/em>how psychological biases can trip up investors<\/em><\/a> without a clearly articulated investment plan.\u00a0 We also wrote about <\/em>the dangers of holding too much cash in your portfolio<\/em><\/a>.\u00a0 All these topics are relevant for the current environment and we encourage you to read these pieces if you haven\u2019t done so already or to reread them if you have already seen them.\u00a0 \u00a0\u00a0\u00a0\u00a0<\/em><\/p>\n

Q3 Market Review <\/span><\/em><\/p>\n

Equity markets started the quarter confidently with strong gains in July across the globe.\u00a0 Although we still don\u2019t have an interest rate increase from the US Federal Reserve, expectations for a 2016 rate hike have increased \u2013 however don\u2019t count on it happening before the November 8 US election.\u00a0 Europe decided not to employ further monetary stimulus in Q3 and economic results continued to reveal a low growth, low inflation environment.\u00a0 The markets often like boring and, looking at European equity market performance, this seems to be one of those times.\u00a0 Emerging markets continued to have strong performance also.\u00a0 Measures of market volatility decreased dramatically as global markets retreated further from concerns over the impact of Brexit.\u00a0 Bond markets were calm and returns steady.\u00a0 The Canadian dollar weakened slightly against the USD over the quarter against a backdrop of weaker economic growth forecasts for Canada published by the International Monetary Fund (IMF).\u00a0 <\/em><\/p>\n