Experts say markets could lose up to 10 per cent of their value this year – and with recent fluctuations, this great market correction could already be upon us. It’s been 400 days since the last official “correction” – but North American exchanges have been suffering for days, with triple digit losses over the last week.
Right now, investor fear is being fueled by slow growth in emerging markets and the U.S. Federal Reserve’s move to further reduce monetary stimulus, which they scaled back by another $10 billion yesterday. This is also the beginning of earning season and traders are quietly waiting to hear how bellwether companies like Facebook, American Airlines and Johnson & Johnson will report. This will give experts, traders and economists insight into what to expect for the year to come.
A Bull Market Can’t Last Forever
2013 was a remarkable year for markets around the world. The S&P gained more than 26 per cent, the NASDAQ up 35 per cent, and in Canada the TSX jumped more than 10 per cent. These gains, especially in the U.S., are unsustainable. The last time the markets saw a sharp decline was the S&P in 2012. Experts are saying this correction is due – and we should be happy about it, as it would give those sitting on the sidelines with cash a chance to get back in, providing sellers with opportunity. A bull market can’t last forever, as nobody would ever get in or out of the game.
Here are a few predictions as to how markets will evolve this year.
Gold Will Rise
As investors get nervous they always run to safe havens, such as gold. This trend has been slowly taking off this year, lifting gold stock. As Canada is a resource rich country, our economy benefits from a pop in gold prices. While our dollar may be at multi-year low, Canadian businesses, especially those that deal in gold, will benefit from a market correction. If investors are looking for opportunities they should talk to their financial advisor about Canadian gold companies that are poised to do well this year.
Rates To Remain Low
Bank of Canada Governor Stephen Poloz recently announced he’s holding rates at one per cent. Holding the overnight rate at this historically low level means returns on fixed income products will also stay low. This can be frustrating for those looking for a guaranteed return on investments, but better borrowing mean our biggest asset, that being our home can continue to climb in value.
Stay Long In Investments
If you’re invested in equities right now, it’s important to brace yourself for a correction this year. But if you are coming off last years tremendous market ride there is room to slow down without it hurting your original investment. Most of us want to save money and know that its growing steadily and not eating into the amount we first put in, known as principal. By always taking the long-term approach to investing, you will be sure to catch the markets ebbs and flows but the average return should still be positive.