I have been saying that it is unlikely that the global economy would experience a V-shaped recovery. A V-shaped recovery describes the shape of the market’s performance in a recession and subsequent recovery when graphed. Essentially, out of the various recovery scenarios a v-shape recovery is the most welcomed because the economy rebounds very quickly. Given the magnitude of the global economic crisis this scenario was unrealistic.

More recently, we started hearing about a “W-shaped” recovery. I am not exactly sure when this term was coined, but I have been arguing for months that the likely scenario for the global recovery will be one where the market will eventually rally, which it has, and then re-test its lows before the economy moves towards a period of extended growth. Now, I have a buzzword that I can use to describe what I have been saying for months.

Currently, we are at the mid-point of the recovery. Going forward I expect that global stock markets will retrench as investors realize that it may take more time for the easing initiatives of the world’s central banks to fully take hold. Investors are a precarious bunch. They tend to like their returns big and fast. This isn’t going to happen this time around. If, however, the markets do retrench and investors buy some high quality names they will do extremely well going forward. If, however, I am wrong and we do have a sharp recovery investors will be equally as happy because the worst will then be behind us.

Mounir R. El-Ayari, CIM, FCSI, C.h. P. Strategic Wealth
Investment Advisor
Associate Portfolio Manager
e-mail: mounir.el-ayari@nbf.ca

As an investor the most difficult decision to make is when to buy and when to sell. The recent rally has not made this decision any easier. Over the last several weeks, investors seemed to have changed their mindset from not wanting to own stocks under any circumstances to panicking because they are afraid that they are going to miss substantial gains on the upside. My advice to these investors is to stay calm. Investment decisions should never be made hastily.

In terms of the economy not much has changed from three weeks ago. The G20 Summit seems to have gone over well despite some bickering between the various countries in regards to how much stimulus is enough. The First Lady, Michelle Obama, was photographed in a genuine embrace with the Queen. And stocks around the world have rallied from their lows. In terms of the economic news, however, not much has changed. So what does all of this mean?

In my opinion, I believe the tone of the market has changed and it’s time for investors to make some long-term investment decisions. The Dow Jones Industrial index is still down 43% from its all-time high, so it has a long way to go before anyone should break out the champagne glasses. In terms of the recent rally the index is up 24% from its low. If you are losing sleep because you didn’t catch the very bottom you probably have unrealistic expectations in terms of your ability to time the market.

As a portfolio manager I am patiently waiting for the stock indices to pull back before making a commitment to buy because I prefer buying on days that stocks are under some selling pressure. I am not, however, going to buy stocks simply because they have risen. I will, however, be taking a little nibble if there is a reasonable pull-back because it would be unfortunate to not take advantage of current stock valuations.

Mounir R. El-Ayari, CIM, FCSI, C.h. P. Strategic Wealth
Investment Advisor
Associate Portfolio Manager
e-mail: mounir.el-ayari@nbf.ca

The global stock markets have had a nice bounce over the past week, something which has caused many investors to “panic buy”. Simply put, this is when an investor chases the market because he or she is nervous about missing a sustained rally.

A few weeks ago I encouraged readers to start at least thinking about committing some capital to stocks. The only thing that has changed since then is that I feel that on any solid pull-back investor should actually commit some money to the markets.

As a portfolio manager I tend to make well thought out decisions before investing my money. I try very hard to refrain from throwing money into the stock market blindly when it’s rising or falling. The initiatives that the US government has announced over the last week seem to have caused a fundamental change in the economy. Although the economic numbers will continue to be negative, it is possible that we may have seen the worst in terms of stock market lows. At the very least the recent rally may greatly reduce the selling pressure going forward thereby making it easier for investors to make informed investment decisions rather than being lead by emotion.

Mounir R. El-Ayari, CIM, FCSI, C.h. P. Strategic Wealth
Investment Advisor
Associate Portfolio Manager
e-mail: mounir.el-ayari@nbf.ca

The Dow Jones Industrial Average dipped below its November lows during the past two sessions. The general consensus is that if it trades below this low for several consecutive days the Dow will likely experience another leg down. Is this a cause for concern? Maybe a little. I would argue, however, that there is something much more important to worry about - when to start taking positions in some of the world’s best run companies.

The problem with the current state of the market is that the last thing on an investor’s mind is thinking about how he or she can take advantage of this unprecedented situation. As a portfolio manager, it is frustrating to see people shy away from giving some thought to allocating at least a small percentage of their portfolio towards stocks. They don’t necessarily have to commit their money, but it would be very reassuring to see some investors to at least start to think about the long-term benefits of buying stocks at current prices. Currently, the number of investors who are taking a good hard look at the market are few and far between.

If history is any indication this bear market will end like most others where it’s the institutions that start nibbling away at stocks, thereby causing the global markets to move higher. Individuals will likely only start buying stocks after there has been a solid bounce. This could range from anywhere from 20% to 40% from current levels. Hopefully things will be different this time around. I am not holding my breath, however.

Mounir R. El-Ayari, CIM, FCSI, C.h. P. Strategic Wealth
Investment Advisor
Associate Portfolio Manager
e-mail: mounir.el-ayari@nbf.ca