Jason Gibbs from Dynamic Funds gives his view on reacting to market uncertainty and geopolitical upheaval
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In times of market uncertainty and geopolitical upheaval attempting to time the markets is hard to resist for many investors. Captivated by the swings associated with new political landscapes or shifting market sentiment, investors make bets that are based more on media noise than investment fundamentals.
But for Jason Gibbs, Vice President and Portfolio Manager at Dynamic Funds, timing the market is not something that’s ever been tempting; he’s seen people make disastrous decisions when consumed by the macro landscape. “You have to be more bottom up. Look at all 11 sectors, do your homework on each and examine the supply-demand fundamentals,” Gibbs says. “Look at who are the best stocks to own and the values of those stocks versus where you think they should trade. If you start there, you’re going to be much better off than an investor who tries to time things.”
Gibbs' main focus is on North American dividend stocks, which he currently describes as relatively expensive, but he’s not too concerned. He doesn’t see any indication of euphoria in the markets right now: investors aren’t blindly buying assets with no regards to prices, just to get into stocks. “When you see investors behaving in that way that’s when you get nervous, like with gold in 2011,” Gibbs says. “But we’re also a long way from a market environment like 2008 or 2009 - those are the best times to buy if you’re looking for outsized returns.”
Gibbs also doesn’t see any sign of despondency or depression in the markets at the moment. Overall, we’re in a fairly optimistic phase in which most stocks are at relatively fair value. Which, for many investors, could mean taking return expectations down a notch. However, Gibbs advises investors to not feel too despondent. “Stocks might do around 5% a year and a lot of that is going to come from your dividend; dividend yields are still reasonable,” he says. “Investors are also going to get going to get dividend growth, which is better than what the alternatives – cash and fixed income – are going to give you. They’re both going to give investors nothing unfortunately, although, investors should hold some of both in order to keep a part of their asset base risk free.”
Although Gibbs believes most stocks are more or less fairly valued, he does note that finding good value is much tougher now than it was a year ago. This time last year many investors were panicking which created good opportunities for those with a cool head, but there’s more fair value now. “Canadian banks, for example, are fair value. The businesses are in great shape and the fundamentals are good but the valuations have caught up to that,” says Gibbs. “Utilities and real estate stocks are also reasonable; they’re cheaper than in July when they were starting to get overvalued. Looking at telecom stocks; last week Rogers was up 7% in one day, which shows that it was undervalued just a week ago.”
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But for Jason Gibbs, Vice President and Portfolio Manager at Dynamic Funds, timing the market is not something that’s ever been tempting; he’s seen people make disastrous decisions when consumed by the macro landscape. “You have to be more bottom up. Look at all 11 sectors, do your homework on each and examine the supply-demand fundamentals,” Gibbs says. “Look at who are the best stocks to own and the values of those stocks versus where you think they should trade. If you start there, you’re going to be much better off than an investor who tries to time things.”
Gibbs' main focus is on North American dividend stocks, which he currently describes as relatively expensive, but he’s not too concerned. He doesn’t see any indication of euphoria in the markets right now: investors aren’t blindly buying assets with no regards to prices, just to get into stocks. “When you see investors behaving in that way that’s when you get nervous, like with gold in 2011,” Gibbs says. “But we’re also a long way from a market environment like 2008 or 2009 - those are the best times to buy if you’re looking for outsized returns.”
Gibbs also doesn’t see any sign of despondency or depression in the markets at the moment. Overall, we’re in a fairly optimistic phase in which most stocks are at relatively fair value. Which, for many investors, could mean taking return expectations down a notch. However, Gibbs advises investors to not feel too despondent. “Stocks might do around 5% a year and a lot of that is going to come from your dividend; dividend yields are still reasonable,” he says. “Investors are also going to get going to get dividend growth, which is better than what the alternatives – cash and fixed income – are going to give you. They’re both going to give investors nothing unfortunately, although, investors should hold some of both in order to keep a part of their asset base risk free.”
Although Gibbs believes most stocks are more or less fairly valued, he does note that finding good value is much tougher now than it was a year ago. This time last year many investors were panicking which created good opportunities for those with a cool head, but there’s more fair value now. “Canadian banks, for example, are fair value. The businesses are in great shape and the fundamentals are good but the valuations have caught up to that,” says Gibbs. “Utilities and real estate stocks are also reasonable; they’re cheaper than in July when they were starting to get overvalued. Looking at telecom stocks; last week Rogers was up 7% in one day, which shows that it was undervalued just a week ago.”
Related stories:
BMO debuts on NEO Exchange with new ETFs
“Value investing makes sense intellectually”
