Investments and the importance of being cool during a crisis

(Quebec) The war in Ukraine and the turmoil in the markets has caused confusion among some investors, many of whom are investors, many of whom go to banking institutions for advice.

Posted on March 3rd

Caroline Plante
The Canadian Press

The volume of calls was higher than usual, Richard Lacasse, media spokesman at Desjardins, immediately acknowledged. This testifies to a certain “investment -related febrility”.

The Royal Bank of Canada also acknowledged the phenomenon earlier this week, aiming to reassure its customers in an email titled: “The Russia-Ukraine conflict and your investments”.

“Increasing geopolitical tensions between Russia, Ukraine and NATO may cause you questions,” the institution wrote.

“Despite disturbing headlines about inflation, protests and war actions, it is important to remember that market changes are normal. »

He added that “in the past, we have found that the reaction period to acts of war is often short, and markets tend to recover quickly from these events.”

This analysis is fairly accurate, added Jean-René Ouellet, investment strategist and discretionary manager at Desjardins Wealth Management.

In an interview with The Canadian Press, he recommended “keeping a cool head”, staying on course and avoiding rash action in response to events.

“It’s never the time to get out on a roller coaster in the middle of a‘ ride ’”, he described.

What history shows us

He explained that with the exception of World War II, and the response to the attacks of September 11, 2001 (which coincided with the burst of the technology bubble), the conflicts had a limited impact on the stock market.

For example, it took them 31 days to recover in the Vietnam War, and only nine in the Cuban Missile Crisis. In comparison, markets took 822 days to recover from World War II.

Experts have listed a dozen major conflicts since 1914.

“Geopolitical disturbances generally have a relatively short-lived effect on stock markets, so there’s no need to panic,” said Mr. Ouellet, who advocates patience and restraint.

Especially since the Russian-Ukrainian conflict remains “limited” in this region of the world, according to him.

“The markets – and here it is a bit embarrassing – will look ahead. […] We will stay in economic expansion, no slippages. Not much has changed. »

The chances of the situation collapsing into nuclear war remain low, said Michel Doucet, vice-president, investment strategist and discretionary manager at Desjardins.

“The message is clear: the United States and NATO will not enter Ukraine. World War: low probability. Global recession: low probability,” he concluded.

To further comfort the worried investor, he indicated that at 0% since the beginning of the year, the Toronto Stock Exchange (TSX) is far from its average decline over the year. Similar to the S&P 500.

Focus on a balanced portfolio

Despite everything, clients reported to Mr. Doucet being “nervous at what I see”. He attributes this nervousness to the fact that in 2022 it is possible to follow Russia’s invasion of Ukraine “in real time”.

“We need to get back to the basics,” he insisted. I build a portfolio that is my mirror, and I never let emotion take over. […] Money is managed coldly.

“Stay within your investment profile, which is in line with your investment policy,” he added, as Mr. Ouellet opposes the risk of selling “in panic” and causing “permanent damage to someone’s property.”

“Having safe havens in your portfolio is great. Just having that is not good investor behavior,” Mr. Ouellet recalled.

It’s really necessary to distinguish “what we see on television, which is horrible”, from the state of the economy and markets, added Louis Lajoie, senior investment strategist and portfolio manager at National Bank.

“For us, it’s about staying on course. Honestly, we are still pretty optimistic about the stock markets for the future. […] We have not changed our strategy, ”he said in an interview.

Like his peers, Mr. Lajoie recommends having a diversified portfolio, part of which is always “well-positioned”, even if it means making marginal adjustments, if necessary.

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