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Letter: Keep calm — it's not financial Armageddon

Investors who stay patient and relaxed will benefit in the long run, this writer says.
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Market volatility may have investors worried, but this writer has advice: Keep calm and ride it out.


Earlier this month, an acquaintance asked me about all the market volatility we’ve seen this summer. He wanted to know if he should stay relaxed or if this was the beginning of a financial crisis. After all, he pointed out, inflation has skyrocketed this year. Interest rates are on the rise, and the media is constantly talking about the possibility of a recession.

How can an investor stay calm in these turbulent times?

In response, I asked him if he remembered early 2020. Who could forget? COVID-19 spread across the planet like wildfire. Stocks plunged into one of the fastest bear markets in history. At one point, oil prices were actually below zero! So many things happened in so short a time, it seemed like financial Armageddon.

But it wasn’t.

By the end of spring, the markets had largely recovered – and investors who kept their heads, stayed calm, and held to their
long-term strategies got in on the ground floor of an incredible bull market.

It’s true that there is a lot of uncertainty in the markets right now. Inflation hit 8.1% in June. In response, the Bank of Canada raised interest rates by 100 basis points, the largest single rate hike since 1998. And with so many Canadians in debt and home prices plunging, it’s hard to feel confident about what the future holds.

As uncomfortable as this is, though, none of it is new. The events we’re seeing are important, and they unquestionably have an effect on how regular Canadians
like you and me live our daily lives. But as long-term investors – which we are – periods of market volatility and economic uncertainty are just sequels to movies we’ve already seen before. And just as in early 2020, investors who stay patient and relaxed will benefit in the long run.

Eric Muir