Investor Insight: Back to the Future?
Jarrett McKay - Nov 03, 2015
As an investor, wouldn’t it be great to travel back in time and alter the course of the future? Knowing what you know now, would you choose to do things differently?
Recall the movie “Back to the Future”, when a young man is sent back accidentally through time to 30 years in the past. It is easy to forget what the world looked like around 30 years ago. But, recall that in 1982, the economy was in the depths of a severe recession. Pessimism was rampant; the prevailing view was that the planet was overpopulated and would eventually run out of resources. Unemployment was around 11 percent in Canada and similar in the U.S.
By the summer of 1982, the predecessor of the TSX Composite Index had posted a loss of over 39 percent over the previous 12-month period. Inflation seemed out of control, and interest rates were extremely high.
And yet, this period of bleakness preceded one of the greatest bull markets in history. An equity investment of $1,000 in 1982 would have yielded over $25,000 today, an annualized return of over 10.3 percent!* Could this happen again?
Conditions today are markedly different, of course, as they are in every cycle. The business environment has undergone considerable change in over thirty years. The world seems to move at a higher speed, particularly in the information sector. Unlike in 1982, interest rates are at rock-bottom levels, and central bankers seem determined to maintain their fight to stimulate economic growth while keeping inflation under control.
Even so, history has shown that times of greatest uncertainty have provided some of the best opportunities for profitable investing. Investors who realize these opportunities take action and don’t sit on the sidelines.
What about your own portfolio? As individual investors, we need to assess each of our positions and reflect on our goals, needs and personal circumstances, as we seek opportunity.
Recovery has been a slow process, as reflected by the sluggish Canadian markets and especially due to the latest challenge of low oil and commodities prices. But there are many positive signs of improvement. Is the climb towards longer-term recovery just around the corner? A trip to the future will be the only way we will know for certain.
*Based on the S&P/TSX Composite Total Index Return (dividends reinvested) from 06/30/1982 to 06/30/2015.
CANACCORD GENUITY WEALTH MANAGEMENT IS A DIVISION OF CANACCORD GENUITY CORP., MEMBER-CANADIAN INVESTOR PROTECTION FUND AND THE INVESTMENT INDUSTRY REGULATORY ORGANIZATION OF CANADA
This newsletter is solely the work of the author for the private information of clients. Although the author is a registered Investment Advisor at Canaccord Genuity Corp., this is not an official publication of Canaccord Genuity Corp. and the author is not a Canaccord Genuity Corp. analyst. The views (including any recommendations) expressed in this newsletter are those of the author alone, and are not necessarily those of Canaccord Genuity Corp. The information contained in this newsletter is drawn from sources believed to be reliable, but the accuracy and completeness of the information is not guaranteed, nor in providing it do the author or Canaccord Genuity Corp. assume any liability. This information is given as of the date appearing on this newsletter, and neither the author nor Canaccord Genuity Corp. assume any obligation to update the information or advise on further developments relating to information provided herein. This newsletter is intended for distribution in those jurisdictions where both the author and Canaccord Genuity Corp. are registered to do business in securities. Any distribution or dissemination of this newsletter in any other jurisdictions is prohibited. The holdings of the author, Canaccord Genuity Corp., its affiliated companies and holdings of their respective directors, officers and employees and companies with which they are associated may, from time to time, include the securities mentioned in this newsletter.
The preceding information is for general information only and does not constitute tax advice. All investors should consult with a qualified tax accountant.
Tax & Estate advice offered through Canaccord Genuity Wealth & Estate Planning Services.
FOR DISTRIBTUION IN CANADA ONLY