A very Happy New Year to all. As another year ends, it’s a good chance to reflect on the rearview mirror, while looking ahead to navigate the road of 2018.
2017 was a great year for equity markets, with broad based gains being delivered across many regions and sectors. This occurred despite the fact of ongoing geopolitical tension from North Korea, and uncertainty coming from our neighbor to the south, particularly trade relations. It reinforces my previous comments that the noise and short-term volatility that ensues from these events have not altered the fundamentals driving the markets.
While the bull market continues to move forward many are asking, is the end of the cycle near?
When comparing the current market increase to others, we believe there is still room for this bull to run, though likely slower. We expect moderate but positive returns supported by continuing expansion and earnings strength. While our forecast for fixed income returns remains low, the fundamentals for the equity markets remains positive. We continue to see inflation being contained. As well, the North American economy continues to push forward with strong indicators in housing and labor, especially in Canada. The Federal Reserve has started to increase rates but we do not see a significant impact to markets from the winding down of quantitative easing. There is little evidence today of an impending recession.
During the New Year, when we all make resolutions we don’t intend to keep (hello kale and quinoa each day), it is important that we spend some time on our financial and planning health. While we see the bull continuing to move forward, it is a perfect chance to reflect on our goals and to ensure we are planning for the road ahead. By starting fresh each year, any events that happened in the past can be taken into consideration when looking to the future. Take the time and have your Investment Counsellor walk through expected returns based on asset mix, and what our investment managers are saying to give you broader depth on your portfolio. It is also a good chance to ensure we are on track to help you reach your goals.
As part of an overall year end checkup, consider a review of your wills, powers of attorney and life insurance. It may not be as exciting as bringing in the New Year but ensuring it’s all up to date could have significant benefits. Working with your advisor, and ensuring you revisit your plans at least once per year, is an easy way to stay on top of your finances and prepares you for the year ahead.
While we feel investors need to prepare for higher volatility as well as an increase in cross asset class correlation, we feel confident in the longer-term market outlook. Diversification to protect against single asset class challenges will remain a focus for 2018, while continuing to examine asset class mixes and weightings to improve stable performance with low downside.
While no bull market lasts forever and there are bound to be pull backs, ensuring that your long-term goals are aligned with your portfolio will better long-term stability and let you worry about your other resolutions for the New Year.
This commentary is provided for informational purposes only and is not an endorsement of any security or sector. The opinions expressed are those of Manulife Private Wealth as of the date of writing and are subject to change. The information in this document including statements concerning financial market trends, are based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons. This material does not constitute an offer or an invitation by or on behalf of Manulife Private Wealth to any person to buy or sell any security. Past performance is no indication of future results. The information and/or analysis contained in this material have been compiled or arrived at from sources believed to be reliable but Manulife Asset Management does not make any representation as to their accuracy, correctness, usefulness or completeness and does not accept liability for any loss arising from the use hereof or the information and/or analysis contained herein. Neither Manulife Private Wealth or its affiliates, nor any of their directors, officers or employees shall assume any liability or responsibility for any direct or indirect loss or damage or any other consequence of any person acting or not acting in reliance on the information contained herein. Please note that this material must not be wholly or partially reproduced.