Inflation and the Worries of Investing
After the markets posted a strong first half fueled by the promise of Artificial Intelligence and falling inflation, the realities of our modern world are weighing on the financial markets once again.
Inflation is once again on everyone’s mind. In Canada, the annual inflation rate rose to 4% in August, renewing concerns about additional interest rate hikes and rates being higher for longer.
Rana notes that the result has been a “wall of worry” where investors tend to focus excessively on the negative aspects of the financial markets. Additional top-of-mind concerns include:
- A COVID-19 resurgence
- Conflict in the Ukraine and now in Israel
- An economic slowdown in China
- A potential recession and ongoing political instability in the United States.
Focusing on this wall of worry can lead many investors to consider selling their stocks, or worse, avoid investing altogether.
But as Rana likes to remind us, we’ve seen this all before. In the past 50 years, we’ve experienced many major crises that have shaken the global economy and the financial markets. Each of these events caused major worries among investors, and many predicted that the stock market would collapse or enter a prolonged bear market. However, each time, the market bounced back stronger than ever.
This shows that the wall of worry is not a barrier to investing, but a ladder to climb. It is important to remember that anxiety and worry are normal. Corrections tend to happen when everyone is overconfident, but that is not the case today.
As investors, we need to focus on the long-term rather than short-term market fluctuations as the right investments are most likely to pull through.
So, what should you do as an investor when faced with the wall of worry we see today?
We know there will be more surprises that will affect us, but we don’t always know what they’ll be.
The best course of action then is sticking to your financial plan and allowing your Advisor to use their experience to help navigate the markets on your behalf.
Your Advisor has the experience, the ability to plan, and the processes in place to help you climb the wall of worry that many investors face today.
If you have questions or concerns, we invite you to discuss your current strategy with your Advisor.
