Published on: Monday, April 21, 2025
Watching capital markets lately has been like watching the weather in Calgary. There, they will say, “If you don’t like the weather, just wait a few minutes”. I’ve seen a lot in over 20 years of doing this, but the recent swings in the value of both stock and bonds are uncommon, to say the least.
I’ve seen some social media posts that scold advisors for saying things like “the markets have always recovered” or “stay the course”. One communication expert said he finds this “annoying”. Fair enough.
I saw another post that said, “If your advisor told you that you have to put off retirement because of the current market, fire them”. Interesting. I can’t think of a time when a client’s plans were set back because of the market. Some people have reduced how much they take out because they feel they would be fine with a bit less income and liked the idea of taking some pressure off their portfolio. But I don’t recall anyone saying, “Well, I was going to retire, but now I can’t”. To the influencer’s point, you have to be ready for a lousy market at any time for any reason. Even ones you could never have predicted, like say, a pandemic!
It’s difficult when clients’ portfolios have taken a big drop. But other than the shock of the number, it should not really change anything for them. It hasn’t thrown them off their plan because their plan has been built for this.
That is not to say that I could see this coming. At least not this specifically and not necessarily at this time. But I could say, with a lot of confidence, that something would happen at some point. I build portfolios with that uncertainty in mind; with a combination of optimism and pessimism.
You have to be an optimist to take risk. You have to believe that, over time, economies and businesses will grow and that your investment will reap rewards. At the same time, experience tells us that dramatic and unpredictable things happen along the way, so you need to manage risk, not avoid it altogether. How you do that differs depending on your situation.
For the clients who are many years away from accessing their investment and who are adding money regularly, volatile markets are actually a good thing. Their next purchase will occur at a lower price.
For clients who are on the cusp of retirement, I have planned for them to start making withdrawals soon and I have parked several years of withdrawals in secure investments such as cash and bonds. It will be a long time, if ever, before they will need to sell stocks or other securities whose values have dropped.
For clients who need income from their portfolio, I’ve invested in reliable income-generating investments. The market value of those investments may have fallen, but the income is still the same and that is what is being withdrawn. They are not selling anything. Their portfolio is also not all in stocks. And for extra measure, there are sums tucked away in secure investments “just in case” this or that happens, and their needs suddenly change. That’s the pessimist in me.
So what I’ve said to them is not “it will recover,” even though I believe that is true. I have said, “This will not impact you”. It’s not because I forecasted what has occurred. Heck no. It was because I’m always concerned about the unknown and always ready for bad news.
Maybe it is not pessimism. Maybe it is skepticism. Or caution. Or prudence.
Please reply and let me know what expressions annoy you or which ones ring true.