Financial advisors of all stripes almost always recommend that investors buckle in for the long term when they make an investment. This strategy has been especially strong since the Great Recession that followed the 2007-2008 financial crisis. Today, I want to discuss why Canadians need to maintain a long-term market outlook.
The last decade of super performances
The market volatility in the late 2000s and early 2010s was followed by one of the longest and most rewarding bull markets in history. Shares of Royal Bank (TSX:RY), the largest financial institution in Canada and largest TSX stock by market cap, fell below the $30 mark in early 2009. By the same time in 2019, Royal Bank stock had more than tripled in value.
This bull market stuttered due to the pandemic in early 2020 but has picked up pace again after more stimulus and friendly monetary policy.
Consistently low rates
Central banks in the developed world have committed to historically low interest rates since the Great Recession. This has generated a very friendly environment for investors and lenders. Record asset purchasing programs from central banks have only been bolstered in the wake of the COVID-19 pandemic. The Bank of Canada, the U.S. Federal Reserve, and the European Central Bank have all indicated that these conditions will remain in a fragile economy.
A recent example of sticking with the market
The violent March 2020 market pullback illustrated why investors need to maintain a long-term outlook. Shopify, one of the most explosive tech stocks in North America, dropped below the $500 mark during the month of March. Its shares hit a 52-week high of $1,900 in February 2021, less than a year after this dip.
