Should Canadian investors be worried about the financial crisis?

Investors who remain patient and relaxed will benefit in the long run, this writer says.


Earlier this month, an acquaintance asked me about all the market volatility we’ve been through this summer. He wanted to know if he should stay relaxed or if this was the start of a financial crisis. After all, he pointed out, inflation has skyrocketed this year. Interest rates are on the rise and the media is constantly talking about the possibility of a recession.

How can an investor stay calm in these turbulent times?

In response, I asked him if he remembered early 2020. Who could forget? COVID-19 has spread across the planet like wildfire. Stocks plunged into one of the fastest bear markets in history. At one point, oil prices were actually below zero! So much has happened in such a short time, it felt like a financial Armageddon.

But that was not the case.

By late spring, markets had largely rallied — and investors who kept a cool head, remained calm, and held to their
long-term strategies have entered the ground floor of an incredible bull market.

It is true that there is a lot of uncertainty in the markets at the moment. Inflation reached 8.1% in June. In response, the Bank of Canada raised interest rates by 100 basis points, the biggest rate hike since 1998. And with so many Canadians in debt and falling home prices, it’s hard to be confident. what the future holds for us.

As uncomfortable as it may sound, none of this is new. The events we are witnessing are important, and they undoubtedly have an effect on the way ordinary Canadians
as you and I live our daily lives. But as long-term investors – which we are – times of market volatility and economic uncertainty are just after-effects of movies we’ve seen before. And just like at the start of 2020, investors who remain patient and relaxed will benefit in the long run.

Eric Muir

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