There's a lot going on in the world right now and sometimes it can be hard to not let it affect your decision making. It's important to understand our own personal biases and emotional triggers so we can focus on our long-term plans and avoid giving in to our short-term anxiety.

 

Three emotional biases that may influence our investing decisions are:

 

• We’re uncomfortable with uncertainty
• We dislike losses more than we enjoy gains [Loss aversion]
• We value today's dollars more than future dollars [Present bias]

 

It's also important to remember that things don't always play out in the market the way you might expect. Who would have thought that oil and gas would be one of the worst performing asset classes during Trump’s last administration and one of the best performing asset classes during the Biden administration? For those with anxiety over the Canadian dollar, you should also remember that the US dollar peaked in January 2017 right before Pres. Trump took office.

 

Nobody can be sure how the tariffs and other rhetoric that is coming out of the US will play out in the markets, but I believe that a properly diversified portfolio will be well positioned to handle the volatility. I can also assure you that things will not end up playing out exactly as you expect.

 

The chart below shows how just how punitive it is for portfolio returns when missing out on even a few of the market’s best days. If somebody invested $10,000 in January 1988 until June 2024 but missed out on the 10 best days, it would’ve lowered their portfolio returns by 50%. It's hard to know ahead of time when those great days will be. This is why a well-diversified portfolio that stays invested is the usually the best option.

 

 

I have also included the latest article from our CIBC Economics team entitled “Gonna hurt you more than it hurts me”

 

As always, if you have any questions, please feel free to give us a call.

 

Have a great weekend.

 

Milan