Market volatility commentary from the Multi-Asset Management Team

Craig Maddock

August 7, 2024

Key messages

A weaker-than-expected jobs report triggered concerns about the U.S. economy.
Equity markets dipped last week but have since rebounded; most remain firmly in positive return territory year-to-date.
Volatility is part of investing, but a diversified portfolio and a long-term plan can help you better weather such periods.

Over the past week, equity markets have seen increased volatility, with major indices experiencing notable declines and concentrated selloffs within mega-cap technology stocks. These sharp declines have understandably raised concerns among investors, and we wanted to take the opportunity to discuss some contributing factors and investing principles to keep in mind during times of uncertainty.

Reasons for the volatility

Several factors contributed to this recent market turbulence. A notable weaker-than-expected U.S. jobs report for July, coupled with a series of disappointing corporate earnings reports has heightened concerns over a possible U.S. recession and the potential need for accelerated rate cuts by the Federal Reserve. Additionally, ongoing geopolitical conflicts and uncertainties around global trade further exacerbated market anxieties.

Volatility: A normal part of capital markets

Market volatility is not a new phenomenon but an inherent aspect of capital markets. Historically, markets have experienced periods of volatility followed by recoveries. At the time of writing, we are already seeing a rebound, with all major indices showing positive gains in the latest trading sessions. Despite the recent selloff, most equity markets remain well in positive territory on a year-to-date basis. This resilience underscores the importance of maintaining a long-term perspective and not making impulsive decisions based on short-term market movements.

Stay focused on the long-term

While such volatility can be unsettling, it is important to remember that these market fluctuations are a normal part of investing and are often relatively brief when compared to an investor’s long-term investment horizon. Investors are much better served by focusing on maintaining a well-diversified portfolio that aligns with their long-term financial goals. The Scotia Portfolio Solutions are meticulously designed and offer this diversification on multiple levels. Each portfolio offers exposure to a variety of asset classes, sectors, regions, and investment styles to help mitigate the impact of market turbulence. As Portfolio Managers on the Multi-Asset Management team, we are continuously monitoring market developments to inform the near-term positioning of Scotia Portfolio Solutions and adjust accordingly. The underlying portfolio managers are also actively seeking opportunities during periods of short-term fluctuations to selectively add positions to high-quality companies at reasonable valuations.

Conclusion

By maintaining a diversified portfolio and taking a long-term approach, investors are better positioned to weather periods of volatility. These short-term fluctuations can be challenging but it's important to stay the course and stay focused on the long-term plan. If you have any questions or concerns, we encourage you to reach out to your advisor.

Craig Maddock

Craig Maddock, CFP, CFA, CIM, MBA, is Vice President, Senior Portfolio Manager and Head of the Multi-Asset Management Team of Scotia Global Asset Management. He leads the team of portfolio managers and investment analysts responsible for managing the firm’s mutual funds, investment pools and portfolio solutions.

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