Matthew Lekushoff |
Market volatility | Investing Biases | Cashless Society
It's no exaggeration to say that the market's been pretty volatile  these past few weeks - the price of oil fell last week to briefly trade below $28, then rebounded, as of this morning to trade over $34. I wanted to use this time to provide some insight into what's currently happening. I came across  a chart   that really stood out for me. What you'll see is 20 years of asset class returns ranking each from best to worst year after year ending after 2014. The chart ends with a cumulative ranking over the 20 years it tracks.

Two things particularly caught my eye. First was that in the 20 years ending 2014 the number one performing class was Energy/MLP. Although I've been unable to find an updated version ending in 2015, I'm fairly confident that given energy's recent fall, it would not have been the top performing asset class, once you factor in that the price of oil has declined by well over 50%.
The second thing that caught my attention was the performance of Emerging Stocks. Had the chart ended after 2007, it's likely it would have been the best cumulative performer by a wide margin, given the great returns it enjoyed from 2003 to 2007. However, the years following were obviously not as strong, leaving it as the fourth lowest, out of 15, on the 20-year chart. Had 2015 been included, it's likely its average return and ranking would have been even lower.
So what does this all mean? First, things can change very quickly. Asset classes that were once princes can become paupers, and vice versa, with unexpected swiftness. This reversion or  regression to the mean doesn't happen like clockwork, but if you track an asset on the chart, you can see how using a strategy  like rebalancing would not only be profitable in the long run, but also lower your risk in the process.

With this recent market volatility weighing on the minds of many, I also want to discuss how our emotions can negatively affect our decision in times of stress.  My latest blog   is the first in a series of three on the psychology of investment biases. For those of you who are not familiar with this topic, I think you will find it very interesting, and also helpful!

On the iPod...ok my phone  
A number of years ago, I tried reading Guns, Germs, and Steel: The Fates of Human Societies, and although I desperately wanted to finish it, I found it too dense and slow moving to get through.
However, since then, I've been listening to the abridged version of the book on Audible. To be honest, although its only six hours long (unabridged is over 16 hours), it hasn't been a fun listen and I've had to fight my way through it, but I'm glad I did.

Author Jared Diamond attempts to explain why Eurasian civilizations (including North Africa), and those of their descent, have on average been more prosperous and successful than others, surviving and conquering other civilizations. He concludes that this is a result of their being blessed by better geography.

Diamond believes Eurasians access to such things as arable land, domesticable animals (for food, transportation, and agriculture), access to trade routes, which led to sharing of knowledge, technologies, trade, and crop sharing, gave them huge advantages. This advantage allowed Eurasians to develop the guns, germs and steel that allowed them to dominate those they decided to overtake.
I am far from an expert in this arena, but find many of his arguments plausible. However, I'm sadly in need of much more education in this area of study.

About town

I had the opportunity to be featured in CTV News this week, talking about retirement planning for millennials. In my experience, I've noticed retirement is the furthest on the minds of most 20-somethings. However, like most things, it's better to start sooner than later! My biggest recommendation is to make automatic contributions every time the pay cheque comes in.
Also, our newsletters are now on the website. Check out previous ones you may have missed and go there to find future ones as well. We'll still continue to send them out biweekly.

Did you know?

Cashless society:  Few countries are moving toward a cashless society as quickly as Sweden. The Scandinavian country is on track to become the world's first cashless society, favouring apps and plastic to cash. The country has created a new mobile payment system with real-time deposits and no minimum spend. There are currently less than 80 billion Swedish crowns in circulation, and only 40-60% of that is in regular circulation. Do you think you could go cashless?


Matthew Lekushoff, CIMA

Financial Advisor 

Raymond James Ltd.


T: 416-777-6368 | F: 416-777-7020


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