Content by Rusty Vanneman, CLS Chief Investment Officer
Despite being in the northern Rockies helping celebrate my parents 50th wedding anniversary, the global financial markets are not helping me keep my eyes off the screens. It’s also a shame that I can actually get a signal on my smartphone on various hiking trails that I’ve been on with the family – I can’t resist getting an update during water breaks.
Quite frankly, corrections can be invigorating. When the markets jostle around, there are some actions that investors can take. Panicking, however, is not one of them.
During corrections, which of course qualify as normal and healthy market actions – especially after the heady gains we’ve seen this year, investors can often find fresh opportunities. Volatility creates opportunity. There are securities on sale. Long-term expected returns go up on market weakness.
At CLS, our team of 14 investment professionals are carefully watching the market action and looking to take advantage of the volatility. One area that has definitely NOT helped us this year but gets increasingly more attractive in terms of relative valuations are the international markets, including the battered emerging markets. Fundamentally, emerging markets remain attractive to the developed markets, though investors have temporarily lost their taste for them. As for how long “temporary” is, that remains the key question, but until favor returns to the asset class segment with the superior valuations, growth, demographics, and fiscal situations, we will continue to maintain, if not build, our emerging markets position.
Taxable investors can also take advantage of market weakness to harvest tax credits to offset realized gains. There can be economic value in taking losses.
Markets are emotional. We’ve had an exciting year so far in terms of robust gains, and CLS portfolios have clearly participated, but sometimes markets just need to take a breather. Call it the pause to refresh, or the step back before the next two steps forward, but just don’t call it the time to abandon your long term investment plan.
Speaking of long-term, it’s time for me to get back to wishing my parents good wishes on their next 50 years of marriage!