For Canadian investors, hearing projections from the country’s central bank, the Bank of Canada, that a bumpy ride could be on the horizon certainly is discouraging.
Managing one’s personal finances and investment portfolios in this context becomes much more difficult, as we all attempt to discern the scope and scale of this recession we are in.
I tend to agree with the views put forward by new Bank of Canada Governor Tiff Macklem that a bumpy ride is likely moving forward, as well as additional potential setbacks as investors continue to reassess the economic damage that will ultimately be done.
This economic uncertainty will, I believe, feed into valuation multiples in the coming quarters, likely erasing the gains we have seen since March lows (and then some, potentially).
For those who find themselves more on the bearish side of the spectrum, adding defensive holdings to one’s portfolio and/or increasing hedges and other forms of downside risk protection, would be a prudent exercise right now.
Staying net long, from a long-term perspective, but having a reasonable portion of exposure hedged, is a great way to manage market volatility within one’s portfolio during times like this.
Staying cautious but optimistic has been the optimal road for those with a long-term investing time horizon, and this time around is no different, in my view.
Invest wisely, my friends.
