Matthew Lekushoff |


It's been a heck of a two-week period. Global markets began selling off in a way we haven't seen in some time last week. Both the S&P 500 and TSX fell 3.9% over the five-day period. 

This week began with virtually all global markets falling heavily, particularly the Dow Jones Industrial Average, dropping over 1,500 
points -----  the largest numerical (though not percentage) fall in its history.

In a surprising move on Tuesday, most markets rebounded strongly ending the day at least 1% higher. On Wednesday, most markets resumed their downward trajectory, and as of noon Thursday, most are 1% lower on the day.

The initial decline was likely triggered by strong employment numbers in the U.S., coupled with an annualized 2.9% increase in wages. Although both are positive economic signs, as with most things in economics, it's never that simple. Investors were likely acting in anticipation of future interest rate increases by the Federal Reserve. By discouraging borrowing, higher interest rates help mitigate inflation, which reduces the amount of money in circulation, which reduces the demand for goods and services, which...well, you get the picture.

At first blush, wanting to keep inflation in check at the expense of economic growth may seem odd. But slower economic growth is much preferred to hyper-inflation ----  a cancerous problem that can ravage an economy for decades.

If this seems complicated or convoluted to you, you're not alone. There is a reason we often joke, "If you ask 10 economists to predict future economic growth, you'll get 12 different answers."

Another likely reason for the volatility could be the historically high valuations of stock markets around the world, but especially in the U.S. Valuations at the end of January for the S&P 500 index were as expensive as they have ever been. High valuations make investors nervous because they know valuations usually fall back to historical norms. This is not to say a prolonged market decline is imminent. It's too hard to tell if that is the case.

Although the future is unknown, there are some things you can do to protect your portfolio. Rebalancing is one of the best risk mitigation strategies at your disposal. It allows you to take gains off the table and re-allocate them to cheaper securities that may rally back in the future. This won't prevent all losses, but rather, should provide a degree of protection against a potential market decline.

This strategy is especially important to use during bull markets, as prolonged periods of equity growth can quietly increase a portfolio's risk level without much notice. Some may argue it's better to wait until just before a correction to rebalance your portfolio. Unfortunately, research shows picking a market top is very hard to do.


The RRSP deadline is March 1. If you aren't sure about your contribution limit, contact Revenue Canada, or  set up an online account . Alternatively, you can check your most recent notice of assessment.  


  "Ask not what a gene does. Ask what it does in a particular environment and when expressed in a particular network of other genes (ie, gene/gene/gene/gene.../environment). Thus, for our purposes, genes aren't about inevitability. Instead they're about context-dependent tendencies, propensities, potentials, and vulnerabilities. All embedded in the fabric of the other factors, biological and otherwise..."  
----- Robert Sapolski, Behave


In the Realm of Hungry Ghosts: Close Encounters with Addiction   by Gabor Maté:   Part science of addiction, part heart-wrenching accounts of lives ruined at the hands of those addictions. I found this book taxing both emotionally and intellectually. If you are interested in learning about addiction, this book will open your eyes, break your heart, but most importantly, change the way you look and think about those who are suffering around you.
The Theory That Would Not Die: How Bayes' Rule Cracked the Enigma Code, Hunted Down Russian Submarines, and Emerged Triumphant from Two Centuries of Controversy   by Sharon Bertsch McGrayne:   A historical account of  Bayes' theory , from its creation to polarizing implementation and acceptance. The book illustrates the theory's importance and utility, especially in situations of little prior knowledge. Unfortunately, I felt it did a poor job of actually explaining the theory itself. For more clarity, I'd recommend watching the Monty Hall Problem , and the  classic breast cancer detection problem .
Not Your Grandmother's I.M.F.  by Freaknonomics: An insightful podcast interviewing Chritine Lagarde, head of the IMF, on how the organization has changed over the years.
The Evolution Of Trust  by Nicky Case: A fun game that will teach you a lot about how trust can be developed, broken, and evolved within a society. If you like game theory, this will really appeal to you.
Learning How To Learn  by Coursera: A really good open online course on how to improve how you learn.  Although targeted towards students, I found many of the strategies helpful and will be changing a few of the ways I try to retain information. 
Human Population Growth Over All of History   by Visual Capitalist: It's shocking how fast the global population rose in the last couple of centuries, relative to all human history that proceeded it.

  • We all know that the best part about watching the SuperBowl is the commercials. But if only there was a way we could see them all at once, without any interruptions. Luckily, TIME has broken it down for us, dividing 2018's best commercials into categories, including Best Cameos, Best Running Joke, and Best Break in Tradition. Enjoy!

Matthew Lekushoff

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