Market corrections are never fun but they are every bit as important to long-term investment success as up markets. Corrections help to bring expectations back to reality and often provide opportunities to buy great businesses at lower prices.
We have been spending a tremendous amount of time over the last few weeks connecting with our extensive network of investment professionals in order to understand the current situation and how best to proceed. The following is a short list of our conclusions to date.
1. This is absolutely NOT the time to panic. Our focus on high quality businesses puts us in an ideal position.
2. Corrections are normal and the two factors that would make this a big one are NOT present (US recession, Global Financial Crisis).
3. The market themes going forward are:
a. Lower for longer – Interest rates ( a positive ).
b. Slower for longer – Economic growth is likely to be slow but at an acceptable pace.
c. Lasting longer – Growth has been so moderate throughout the duration of the economic recovery that it could persist for a lot longer as the lack of inflation allows interest rates to stay low ( a positive ).
d. The potential investment implication results. Returns for bonds and equities could remain positive for the next couple of years but modest.
We continue to monitor the situation closely and will provide updates if we see things changing. In the meantime, please give us a call if you have any questions!