A financial expert well known in the Stettler region says the tumultuous effect of coronavirus on global markets is unpleasant but will come to an end followed by growth.
Peter Boys, of Boys Financial Services, recently told the ECA Review he’s been in regular contact with his clients and advising them that the market does go down from time to time, and even though coronavirus is an unusual event, in the long term it’s part of the up and down cycle.
“It’s silly to compare the last week to the Great Depression, North American unemployment is near a record low and the market was still up over the previous 10 months,” said Boys at the ECA Review Stettler office March 17.
Recently, global markets have been characterized by unpredictable ups and downs as coronavirus spreads across the globe.
Uncertainty about how the virus will affect China’s production ability and the global workforce has seen stock markets such as the Dow Jones drop as much as almost 13 per cent on March 17, while the BBC proclaimed recent drops caused by the global pandemic were “as bad as Black Monday of 1987.”
Boys said investors should keep a clear mind and look at the big picture. “It’s also hard to think of a time when sentiment has changed so far, so fast than these last weeks,” said Boys.
“And what’s silly is to assume that abrupt shift won’t continue as it feeds on itself and leads to real economic problems. But let me offer some advice…we’ll get through this.
“It won’t be easy, and for some, it will be agonizing. But no one should be surprised when a market economy that offers so many benefits occasionally asks something in return.”
Boys said it can be very difficult to stay frosty during times like these, but said he had some good advice based on his decades of experience in the financial services world.
“Booms plant the seeds of busts, and busts do the same in the opposite direction,” he said.
“There are no exceptions to Newton’s Third Law of Physics,” said Boys. “Every action has an equal and opposite reaction.
“Market increases make people complacent, assets expensive and business fragile, all of which are easy to discount and hard even to measure when things are going well.
It’s usually only in hindsight that we look back and realize how oblivious we were to the forces building up against us.
“The same thing happens in reverse during busts. Consider that after this last couple of tumultuous weeks, people are now more aware of the risks they’re taking, businesses are looking for ways to get more productive.
It’s strange to think that we’re better positioned for future growth this week than last week,
How can that be given everything that’s happened? It may get worse, but every step down plants the seeds for the next ride up.”
He said another valuable piece of advice is akin to the tortoise and the hare parable.
“It’s about making decent returns for the most prolonged period possible,” said Boys.
“It’s times like this that you realize financial survival is not just relevant to the broke and paranoid, it’s the single most crucial ingredient to long term growth.
“Survival means different things, including to be preemptively prepared for those occasional downsides both psychologically and financially when they occur.
“Part of the unforeseen benefit of significant declines is it pushes investors back toward strategies they can stick with for more extended periods.”
Boys said it’s also important to be wary of taking your financial advice from cable TV or social media.
“It’s easy to say things like ‘Everybody’s panicking,’” he said. “But it’s never even close to accurate. The vast majority of investors, workers and business managers are just trying to get their kids off to school, drive to work and make it through the day a little smarter and more productive than they were yesterday.
Always keep the breadth of ‘panic’ in perspective.”
He added that history proves ups and downs occur but nobody can foresee the future.
“Like a blind man who doesn’t know where a wall is until his cane touches it, markets cannot know when optimism and pessimism have gone too far until they bump into the limits and enough investors protest in the other direction,” said Boys.
“The peaks and bottoms of market cycles always look irrational in hindsight. But in real-time, markets just seek the limits people will endure when the gap between an asset’s upside and what investors will stand, creating an opportunity to be exploited.
“It looks terrible today, and it might look terrible tomorrow, but hang in there as time heals all wounds.”
Stu Salkeld, LJI reporter