Four days, a 6% drop for the TSX, and a whole lot of pain for people with money in the market.
This week's meltdown was gut-wrenching for those who watched holes carved in their retirement accounts and investment portfolios, as economic worries and debt tremors sent stock markets down sharply around the world.
The trigger for the late-week plunge wasn't a single event, but rather a buildup of bad news from this summer of discontent, said Douglas Porter, deputy chief economist with BMO Bank of Montreal.
"Obviously, nerves have been rattled globally by first the European situation, then the U.S. debt wrangling and then a few signs of softening in global growth," Porter said in a phone interview.
As the U.S. debt ceiling standoff built to a climax, the "sense of nervousness" in markets was evident, Porter noted. Compounding Friday's whipsaw effect -- which saw the TSX open positive, plunge almost 500 points, then rebound to a 218-point loss -- was low volume, which can increase volatility, he said.
August is often a bad month for markets at the best of times, he pointed out.
On the positive side, stocks didn't end the week on the type of "nasty downtick" that was common during the 2008 financial crisis, Porter said. But he predicted more turbulence in the short term. "I think the markets are going to be on tenterhooks for the next week."
People who rode out the volatility and avoided the instinct to dump equity holdings did the right thing.
It was a great opportunity for investors with available cash to pay sale prices for high-quality stocks, the financial adviser said. Because the Canadian dollar is high and Canadian markets have outperformed in the past decade, however, good investing opportunities are more likely to be found outside our borders.
Some experts are finding blue-chip bargains in the U.S., where corporate earnings are strong and profitable dividend-paying American companies appear cheap.
