While you were hopefully out enjoying the sun up at the cottage or elsewhere this past long weekend, there was some news that caused some markets to drop that we think you should be aware of.
With the increasing trade rhetoric between the US and China, the Chinese Central Bank allowed the exchange rate for their currency, the Yuan/Renminbi, to a level not expected by global investment markets. This change was considered to be a devaluation of their currency against the US Dollar in order to counter the impact of increased trade tariffs enacted by the US. As a result, the US stock markets, which were open Monday while we were at the lake, fell between 3-4%.
In the markets, we often see these so-called ‘event shocks’. There have been many of these shocks throughout the years that make great news and cause concern. They are all resolved, one way or another. The resolutions of these shocks may be either positive or negative for markets and they may take time to resolve, but they are resolved eventually. Once resolved the markets continue on.
What does this mean for you and your savings?
Not as much as the media would suggest it does. The key item to remember is that when we see the news, the media only really ever talks about the sensational ups and downs of the stock market. The media does not know how your portfolio has been diversified and constructed.
All of this being said, we have made some small tweaks to our discretionary portfolios to prepare for this recent shock. We adjusted the portfolio by reducing some of our Canadian banks which had become a bit too large of a percentage of the portfolio and we added a position in gold which has run-up recently. Since the change, the banks have fallen further and gold has increased nicely.
Through all of the shocks the markets may send at us, our portfolios are constructed and built the same way – focus on the preservation of capital, income paid to us from the investments we own and, finally, a reasonable rate of growth. This investment philosophy is designed to minimize the impact of the shocks and keep us in target for your goals.
Always remember, risk that we take on in your portfolio is personalized to you and your needs. The goal is to limit any potential losses so that you can continue to achieve your financial goals.
Vice-President, Portfolio Manager