Fear among investors has increased but there's danger in locking down a fixed return
Aaron Ruston is warning his clients not to panic in the ongoing challenging market and lockdown on the downside as they try to find firmer ground for their investments.
“The increasing inflation and rapidly increasing interest rates have certainly brought about a scare,” Ruston, president and financial advisor for Purposed Financial Corp. in Moose Jaw, Saskatchewan, told Wealth Professional.
“We’re seeing more people want to look at GIC rates and we’re talking them through that kind of thing and saying the markets do come back, so make sure you’re not locking in that downside by fixing in at 4% or 4.5 % if we get a rapid return.”
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Ruston, who has about 200 clients and $60 million in assets under management, said a couple of clients have moved on because that’s exactly what they want to do. But his firm is gaining clients and he’s noticed their fear has increased as they’ve gone through COVID and market volatility, and rising inflation and interest rates, and now face the threat of a recession.
“They’re wondering when the next shoe is going to drop, and that’s caused some concerns in some sectors,” he said. “But, overall, we continue to move ahead and communicate with our clients and, hopefully, they have confidence in what we, as their money managers, can do and everyone can come out of this in a positive way.”
He noted that he tells his clients that he’s been in the business for 38 years and seen a dozen market drops, some even more substantial than this, and each time they’ve returned.
“But, when you’re in the middle of the storm, even if you’ve been through it before, they’re still wondering what’s going on,” he said. “We’ll pull out of it. It’s just a matter of when and, hopefully, the use of medications won’t have escalated so dramatically as they deal with their stress levels.”
Ruston said he’s seeing increased concern among those about to retire since they’re coming into a fixed income situation. Even though they’ve seen this kind of market before, it doesn’t make it any easier. But, he’s hopeful that the markets will rally and alleviate their concerns.
“I don’t want to start shifting things around so much that we’re essentially locking in losses,” he said, noting that he’s made some portfolio adjustments, but hopes to ride out the market since he’s already chosen good long-term investments.
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He’s not banking on a recession yet, even though he’s seeing local home sales drop.
“I believe firmly that Wall Stret doesn’t really care about Main Street,” said Ruston. “So, if we see things getting hit at a personal local level, I feel that, even in the mid- or long-term, the big markets will continue to drive forward.
“People say, ‘Aaron, you’re an eternal optimist.’ I’m really not. I’m just a realist. I’ve been in this a long time, and it really sucks every time the markets do this. There is always a different combination of factors that bring it about. I just think that we make sure the plans are sold and we make the necessary changes, but then we just ride it out.”
