{"id":719,"date":"2017-01-30T15:17:01","date_gmt":"2017-01-30T23:17:01","guid":{"rendered":"https:\/\/chaltenadvisors.com\/blog\/?p=719"},"modified":"2017-01-30T15:17:01","modified_gmt":"2017-01-30T23:17:01","slug":"chalten-investment-review-q4-2016","status":"publish","type":"post","link":"https:\/\/chaltenadvisors.ca\/blog\/chalten-investment-review-q4-2016\/","title":{"rendered":"Chalten Investment Review – Q4 2016"},"content":{"rendered":"

Welcome to the Chalten Investment Review for Q4 2016.\u00a0 \u00a0At the end of this past quarter and year we reflect and feel relief that we don\u2019t hang our hat on the crystal ball of prediction!\u00a0 After the rocky start stock markets had in January and early February, who could have expected the rebound through the rest of the year?\u00a0 As the US election loomed, uncertainty clouded the crystal ball once again and the result turned the crystal ball into more of a snow globe\u2026yet stock markets continued upwards.<\/em><\/p>\n

It\u2019s difficult to predict what\u2019s going to happen with elections, referendums or anything else and it\u2019s sometimes even harder to predict how financial markets will react to those events.\u00a0 There were no shortage of opinions about what might happen post the US election, for example, and in the aftermath we were asked by many what, if anything, should be done with their investments.\u00a0 We answer with another question \u2013 \u201cAre your goals different post the election?\u201d taking inspiration from Ron Lieber in the New York Times who stated it plainly:<\/em><\/p>\n

\u00a0\u201cOnce upon a time \u2014 like, say, last week \u2014 you had an investing plan that was based on goals that may come years or decades from now. Perhaps you\u2019re hoping to buy your first home. Maybe you\u2019re trying to save enough to send a couple of children to college. You hope to retire by age 67.\u00a0 Has any of that changed? If it hasn\u2019t yet, then it\u2019s not clear why your investments should.\u201d <\/em><\/p><\/blockquote>\n

Rob Carrick of the Globe and Mail wrote:<\/em><\/p>\n

\u201cUncertain times are bullish for market strategists, gurus, pundits and such who want to build a brand by offering clarity about what happens in financial markets\u2026.Ignore it all. Do not remake a portfolio that was sensibly diversified using bonds and Canadian, U.S. and international stocks\u2026.\u2013 why tilt a portfolio on pure speculation?\u201d<\/em><\/p><\/blockquote>\n

Both wise and recommended approaches!\u00a0 Speculating and investing are very different things.\u00a0 You are an investor and investing successfully is a long-term game.\u00a0 As our wise friend Mike says, \u201cI\u2019d bet $50 but not my portfolio\u201d.\u00a0 Indeed!\u00a0 \u00a0So what should you do in the face of uncertainty?\u00a0 As we wrote in November:<\/em><\/p>\n

\u201cIgnore the noise, Stick with your plan, Ride through short-term volatility, Re-balance if necessary, Observe and reflect\u2026\u201d<\/em><\/p><\/blockquote>\n

Going forward, whether we continue to experience uncertainty and surprise or relative calm (and remember that sometimes our level of worry is shaped simply by our chosen reading sources) there are certain tenets of investing that carry us through all environments.\u00a0 We wrote about some of those in Q4 when we recommended that investors <\/em>educate themselves about fees<\/em><\/a>, be aware of the <\/em>evidence that shows how difficult it is for active mutual fund managers to beat the market<\/em><\/a> and <\/em>the important role of saving and discipline<\/em><\/a> in the success of a long-term investor.\u00a0\u00a0 All these topics are relevant for any 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\u00a0\u00a0\u00a0<\/em><\/p>\n

Q4 Market Review <\/span><\/em><\/p>\n

Global equity markets increased overall in the 4th<\/sup> quarter.\u00a0 The Canadian stock market continued it\u2019s 2016 rebound in Q4 with especially strong performance from the resource sectors.\u00a0 In the US, the flow of information was dominated by the presidential election and the Federal Reserve raising interest rates. In Europe, while the value of the pound dropped, the fear over Brexit seemed to recede further, the ECB continued monetary easing and economic recovery continued at a slow pace.\u00a0 Asian stock market performance was mixed with Japanese markets up over the quarter while the Yen fell.\u00a0 The rest of Asia fell over the quarter along with many Emerging Markets with some attributing the drop to concerns over future US foreign, trade and economic policy.\u00a0 From a style perspective, value stocks largely outperformed growth stocks and small cap stocks outperformed large cap stocks.\u00a0 The evidence shows that these patterns tend to hold over the long-run, but certainly not every year.\u00a0 The important thing is to be invested in the market at all times so that when risk premiums are rewarded, your portfolio will benefit.\u00a0 In bond markets, yields were up during Q4 and that meant lower prices, especially on long-dated bonds.\u00a0 <\/em><\/p>\n