Events in three countries – China, Greece and the U.S. – drove markets in 2015.
If you followed the news in 2015, you know that there were volatile times for investors. A year of ups and downs has made it abundantly clear that global events affect Canadian investors.
Of all the dramatic changes that took place in 2015, Greece’s debt issues, China’s economic slowdown and the possibility of rising interest rates in the U.S. had the greatest impact on global – and Canadian – financial markets.
1. Greece’s debt burden
Throughout the beginning and middle of the year there were concerns that the European Union would begin to break up under the weight of Greece’s large government debts. However, markets settled somewhat in the middle of the year as Greece, along with the International Monetary Fund, the European Central Bank and the European Commission, came to an agreement that would provide Greece with further bailout funding on the condition of spending cuts, tax increases and other austerity measures.
2. China’s slowing economy
China is the second-largest economy in the world and its health is often a proxy for global economic health. While China’s economy was still growing at approximately 7%, it was down from the recent highs that investors were comfortable with. China’s slowing economy has had a significant negative impact on commodity-exporting countries, such as Canada, because of dwindling demand. What happens next in China will be on every investor’s mind in 2016.
3. Interest rates in the U.S.
This is more a case of something not happening, as the U.S. Federal Reserve Board (Fed) did not raise its federal funds rate in 2015. The U.S. was one of the good-news stories in 2015 as its economy continued to grow. Later in the year, however, ongoing uncertainties about the strength of China’s economy, the oversupply of oil and geopolitical unrest began to weigh on the U.S. economy. As a result, the Fed did not raise its key rate in September as many investors had expected.
What can you do about it?
In a word, diversify. A well-diversified portfolio – one built of cash, bonds and stocks from around the world – will help temper market declines when bad news drives market performance, and will provide exposure to strong markets when economic growth picks up.
Contact us to discuss how a diversified portfolio can help protect you from market volatility.
13 January, 2016 Events