Principal At Risk (PAR) structured notes are the most complicated instruments we recommend to clients. We are breaking them down for you this month and giving you a couple of examples of ones that some of you have owned. Structured notes can work in a portfolio as an alternative to fixed income.
As we know, 2022 was a tough year in both the bond and equity markets. There were several events that created this environment, including: a wave of cash from COVID benefits drove spending, resulting in inflation and causing central bankers to raise interest rates rapidly; the war in Ukraine sent a shock around the world; and the continued lockdowns in China wreaked havoc on supply chains worldwide.
Can I still reach financial independence? What’s up with the markets? These are questions we all struggle with. It is a function of age. It is a function of debt (read mortgage), and it is also a function of desire. Desire means the propensity to save for your future.
Humans have three ways of dealing with conflict: fight, flight, or freeze. In this bear market, many investors might be in freeze mode, keeping cash on the sidelines as global markets continue their rough ride. In the first six months of 2022, the S&P 500 was down -20.6% while the Nasdaq dropped -29.5%. The S&P/TSX, MSCI Europe, and MSCI EAFE also fell -11.1%, -15.5%, and -21.0%, respectively during this same period.[1] Investors holding on to cash may be waiting to see what will happen with the following issues.
It would be nice to know that answer but when it comes to market timing, one of Zoe’s favourite quotes comes to mind: “You are either lucky or you’re wrong.” Big stock downturns are normal, albeit unpleasant. Since 1950, the S&P 500 index has fallen more than 20% from its high on ten different occasions.
Wow, like most, we got a pretty good shock this past weekend at the gas pump and the grocery store. Inflation in Canada is at a whopping 5.7%. The Bank of Canada’s (BOC) 2% target rate seems to be way in the rear-view mirror and to add insult to injury, the BOC boosted interest rates by 0.50% last week…make it stop.
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