Episode 63: It's Been a Wild Ride | What's Going On, Up & Down in the Markets.

Josh & Colin talk about the latest market movements, the headlines and the recent rally. Were you feeling optimistic about October, or were you more pessimistic? There was a lot of pessimism baked into the market, as Josh says. Also, there's no better word for "knee-jerky."

What is Barenaked Money?

Slip into something more comfortable and delve into personal finance with Josh Sheluk and Colin White, experienced portfolio managers at Verecan Capital Management. Each episode demystifies complex financial topics, stripping them to their bare essentials. From investment strategies and financial planning to economic headlines and philanthropic giving, delivered with a blend of insight, transparency, and a touch of humour. Perfect for anyone looking to understand and navigate their financial future with confidence. Subscribe now to stay informed, empowered, and entertained.

Verecan Capital Management Inc. is registered as a Portfolio Manager in all provinces in Canada except Manitoba.

Speaker 1:
You're about to get lucky with the Barenaked Money podcast, the show that gives you the naked truth about personal finance, with your hosts, Josh Sheluk and Colin White, portfolio managers with WLWP Wealth Planners, iA Private Wealth.
Colin White:
Welcome to the next episode of Barenaked Money here with Colin and Josh. I'm super tickled to be here with Josh, the one, the only, the magnificent, the glowing, the person who knows every number, all of them, like one through 10. He knows every digit and he knows how to use them very, very well. So we're going to talk today about the best October ever. Right, Josh?
Josh Sheluk:
For the Dow Jones, just to qualify.
Colin White:
No, no, no. No, the headline was The best October Ever. I read the headline. Isn't that the whole story?
Josh Sheluk:
Well, sure. Let's go there, then we can just close this podcast off and go home for the day.
Colin White:
No, I know, we have to get into the details. And I guess we could start by pointing out that the Dow has its flaws as an index even. Do you want to start there or do you want to start with other indexes?
Josh Sheluk:
Yeah, well, why don't we start there. So the headlines are always the sexy things or the terrifying things depending on what type of emotion the media is trying to elicit at any time. So cherry-picking the Dow Jones Index to display those numbers. And by the way, best October ever is very specific as well. They're highlighting one specific month of the year and saying it was the best one ever. So it's not like it was the best month ever. It's not like it was the best month ever for global markets in general. But if you're cherry-picking that one number and looking for a sexy headline, that's the one.
Colin White:
Well, 14% is a pretty sexy number as well. So that is certainly eye-catching. But it's also, it's 30 companies and it's not cap weighted, it's price weighted, which again, there's some issues with it. But again, we're going to start to figure out or start to try to explain to people a little bit and give a bit of perspective on why the headlines can be misleading. But at the very end, or some point during this podcast, I'm going to point out what it does teach us, because there is a valuable lesson here lurking to be uncovered at a later point in this podcast. Josh, why don't you run down some of the other numbers and put this in context a little bit and compare it to things.
Josh Sheluk:
Yeah, so we're recording here mid November and it's been a pretty interesting last six weeks or so. Markets at the end of September looked pretty putrid and there was definitely a lot of fear and reluctance out there to do anything related to stock markets at that time. But since then we've seen a pretty significant rally kind of across the board with global markets. Even if you look at of broad-based US or global markets, you're seeing markets that are up about 10% from the lows in September. And in Canada here we're looking at numbers up about 7% since the low in September.
So it has been a fairly remarkable run over that period of time. It's just been six weeks and we've seen a lot of strength in the markets, which I don't think if you go back to the end of September, you pull a hundred people, there's not going to be a hell of a lot of people in that poll of a hundred that are going to be very optimistic or say that, "Hey, my portfolio's probably going to be up 10% from here on out." That's my thought. What do you think, Colin?
Colin White:
Well, a lot of the headlines about October were the miserable Octobers that have happened in the past. Because some of the biggest stock market collapses have happened in October, and there's a whole school of thought that you should avoid October at all costs because bad things have happened in October. There's all those headlines as well too. But again, it was not knowable. This is something that really just crept in. And again, the market is the leading indicator.
And Josh, we spend a lot of time looking for leading indicators, but there's a lot to point out that the market is the quickest place for people to vote. It's the most immediate feedback loop. When people's mood changes, it's the quickest way they can express it. And that's kind of what, I mean, we had that one day, it must have been in September, when the CPI number came out and it was 0.1% higher than expected and the market started with a two and half percent selloff and ended up over 3% at the end of the day. It was a 5.6% top to bottom all in one day, seemingly on that one report on CPI, which initially looked disappointing, but upon further reading and reflecting, people decided maybe it wasn't so bad. So again, these things will manifest themselves in the movements of the markets. Did you see anything more in that 5.6% day that we experienced? Did you read any more into it?
Josh Sheluk:
So you're talking about the September day on the CPI print, and I'll trump you with the October day on the CPI print because this one came in 0.2% less than expected, and markets were up in the US over 5% on the day. So it just goes to show how knee-jerky, for lack of a better word, the market has gone on some of this stuff, specifically the inflation numbers. It's really hard to know how much pessimism is sort of baked into the market. And by the way, inflation's still really hot. It's not a good number still.
It's still, if you looked at it in a vacuum, you'd say that's really bad, but the market was up 5% on the inflation number. So it just goes to show how much pessimism was baked into the markets ahead of that CPI print. And that's another thing that's totally unknowable. You can kind of get a sense for how much pessimism is out there, but to know exactly and to know exactly how people, market participants collectively are going to react when things tilt even just marginally one direction or the other from what's expected, it's really hard to know.
Colin White:
Okay, note to Kathryn, if you could find a better word for knee-jerky and substitute it in for Josh's earlier comment, that'd be really helpful.
The other thing that I wanted to point out is that these things gain a life of their own, like the initial news comes out and then people begin to react to the market moves. Now there's automated trading and there's program trading and algorithms are running, so things can gain momentum far in excess of any actual definable reaction to news. Because it's an organic beast, it reacts. There's a little bit of a puff of wind or change in temperature, it can set a cascade in motion that, again, really is unknowable. So that's why there has to be all this caution around these moves. And thank you for trumping me, Josh. Not that you're a competitive guy. I'm not going to bring forth anymore of my numbers because you probably have a better number than I do.
Josh Sheluk:
Well, the reality is that both those numbers are super interesting when you put them side by side. Because one month you get something that's slightly disappointing and the market does crazy things. The next month you get something that's the same number but slightly positive and the market does equally crazy things just in kind of a different direction. So the contrast between those two numbers I think is just really fascinating to think about. And if that doesn't humble you when you see something like that and humble you and make you realize that I don't really know what the hell is going to happen on any day or month or week in the markets, I don't know what it is that's going to give you that wake up call.
Colin White:
Well, I mean, the world tries to teach you lessons but the key is do you listen? And again, there's still pundits and I still get questions from clients and they're well meaning people. I mean, this is just the natural human condition. They say, "I know that interest rates are going to go up," or, "I know that inflation's going to go down." And it's like, "Okay great, I'll give you that, I'll give you that one thing." Let's just pick [inaudible 00:08:08] and say, "Now, tell me the next thing. What does that mean?" Because even if you get it, the number or the direction of something, it doesn't mean you are going to be able to remotely have an idea of the knock-on effect of that. Because again, it's an organic system that reacts very, very quickly. And again, it's just been taught to us again.
Josh Sheluk:
Yeah, the other important thing to highlight here is just looking, so we were talking about the positive market returns over the last six weeks or so, but it's also equally important to highlight how negative September was right before these really positive moves. So we've seen over the last month or two, so September, October, you've seen one of the best months in the last couple years with October. And you've also seen one of the worst months in the last couple years with September. So September, S&P 500 numbers here, September the market was down 9%. October the market was up 8%. So go figure that out.
Colin White:
Well, it's also true if you take a look back anecdotally. A lot of the best and worst days are really close to each other. One sets up the other. Where you go matters a lot, where you start, and when you see a pullback. At a certain point it gets described as oversold. That's a very abstract concept. It's not easily definable. But oversold basically means it's gone too low by some measure. Going to be a snapback effect. So peak pessimism is another way people would describe that moment. There's lots of different ways to describe it.
But the best way to know that you just went through that is to have the best month ever. That's normally a reaction of something having gone too far. So it is super dynamic, and these aren't small moves we're talking about. To all of you out there who have been extrapolating your statements for the last six or seven months, calculating these monthly drops, your account's going to go to zero within the next five years, do the math now. Because if your account goes up by 9% a month, you're going to be really wealthy really soon. So maybe apply the same logic that you've been applying to your statements as they've been dropping. It'll make you happy a little bit, but don't pay too much attention to the number because it's not going to happen either.
Josh Sheluk:
Yeah. So you mentioned, Colin, the market's trying to teach you lessons. If you took one or two or three lessons away from the last few months, what would it be? How would you summarize that lesson for somebody that's not paying attention?
Colin White:
I don't want to sound like a broken record, but it's just a reteaching of the philosophy that we use when we're dealing with these issues. Don't be confident in the short term. Don't think that you know what's going to happen in the short. It's way too volatile to be predictable. And this is a lesson that's being retaught. It was taught when the pandemic hit. It was taught when Donald Trump became president. It was taught when Russia invaded Ukraine. Every time something completely unexpected happens that has a material effect on your life, you should get a little more humble about what comes next. And that should not evoke a sense of helplessness or hopelessness. Just protect you from being so certain about something that you expose yourself to unnecessary harm. So I always want to do the second thing, is people are looking to predict the future for a feeling of safety. If you abandon that, you still deserve to feel safe.
Having a false sense of safety is actually way more dangerous than dealing with the chaos that is the world. So what I like to do is to keep banging on the drum, pointing things out in real time as they happen. Because honestly, Josh, I did not see all that much written about how spectacular October was. That was a fleeting thing on my newsfeed. It didn't dominate anything. But again, it is an actual thing and it probably goes to our disposition to want to watch a train wreck in real time rather than to talk about good news. And this is significantly good news.
Josh Sheluk:
Yeah, it's interesting, the train wreck thing, because I've seen some studies recently that have actually studied the news cycle and the headlines. And the trend is that over the last several decades, the news has got consistently more negative in tone on a regular basis. And I don't know if that's something that's changed with humankind and our viewpoints of the world, or if it's just that maybe media companies have woken up to the idea, the fact that these negative headlines capture more eyeballs and more eyeballs is good for ad revenue and things like that.
I don't know what it is that is pushing us in that direction. But that's often said that the market climbs a wall of worry and that seems to be basically persistent as long as I have been in this industry, so going back like 12 years now, as long as I've been around, there's never positive headlines. There's always negative headlines. And the market kind of goes up and down despite what is going on in the headlines. And maybe you can tell me, because you've been around longer than I have, is this something you can kind of tangibly see that things have got more negative media-wise over the decades, or?
Colin White:
Well, sure, and really for sure. I mean, do I have numbers to back it up? No, not at the tip of my tongue. But yeah, I think what we're dealing with, Josh, is that the media landscape, competition for eyeballs, I wouldn't even call it all media. I mean, social media, regular media. Competition for eyeballs has gotten a lot more now. Back in the nineties when I started, again, there was no internet when I started giving financial advice. You had the Global Mail, you had a few other publications that you would read. There wasn't as much competition for your attention as there is now. And the negative emotions are way more motivating. We are wired to protect ourselves from bad things on a very fundamental level. So that's a far more motivating thing.
If the headline comes out as like The Best October Ever, Three Key Things To Protect Yourself in December, yep, I'm going to click on that. I want to know the three things I need to do to protect myself this month. Now, even if last month was great, what do I need to do to protect myself this month? Those are super effective headlines and it becomes a self-fulfilling prophecy when they're successful, more headlines like that are going to come out. But I do believe it's based on the fact that there's so much more competition for our attention now, and the stakes are huge for getting it right. So there's no room, there's no room for anything that's not super effective.
Josh Sheluk:
And I guess, smartphones seem to have killed our attention spans collectively. So that's maybe why you need to be a little bit more alarmist to capture the attention. Because, well, hell, I'm not going to spend five minutes reading that article unless you really capture my attention because I don't have five minutes. I'm moving onto the next thing on my smartphone.
Colin White:
Well, Kathryn's got me on TikTok trying to figure out how we deliver financial information in 45 second chunks. Come on. No, just please. I'll try [inaudible 00:16:01].
Josh Sheluk:
Can I have 60 seconds maybe? No, 45. Okay.
Colin White:
I've made it this far. I mean, hey, I'm talking into a thing on my desk that's going to go up into the cloud and through a satellite and down to somebody's phone somewhere. So I've got this far. So maybe I'll find a way to take the messaging and stick it on a Tik or a Tok. I don't know what they call them.
Josh Sheluk:
So I guess, as we kind of wrap up here, what does this all tell you about the going forward period? Because I think that's, when we're investing, we're investing for going forward. So what does that tell you? What should we be doing with our money now?
Colin White:
Are you trying to be funny?
Josh Sheluk:
It's a skill testing question.
Colin White:
It's a trap. It's a trap. What we should do going forward is not be certain. And again, people call it glib and trite and we're not trying very hard. But look, the honest answer is keep your long-term money long term. The big lesson in this, here's the big reveal to those of you out there who are sitting and waiting for it to get better, if you take a look at the Dow, you just missed the first 14% of the recovery. So if you've been sitting and waiting...
Josh Sheluk:
Too late.
Colin White:
Well, you're not too late. It's going to go up from here. Don't wait longer. But you just missed potentially the first 14% of the recovery. That's material. That's the cost. That's the cost of thinking, "Well, I'm going to wait for it to get better and put my money back in." Stop it. Take that message from this podcast. Stop it.
Now, again, from this point forward, can it go down? Yep. Is it going to go up? Yep. Don't ask me when. Over the long term, the economy heals and the market heals and things move forward. We have inflation. Companies' earnings are going higher, people are paying more for things. That eventually will get reflected in stock prices. I don't know when. Oh, wait. What did North Korea do today? Vladimir Putin's body was found? What? I mean, the things that are going to happen over the next little while could completely move things. So just abandon the idea that there's any reasonable way to know with any certainty in an investible way. You can't know in an investible way what the near term holds.
Josh Sheluk:
Yeah. I think, one of the things I've been telling people is that we've been, and we always do, we plan for multiple futures. So if you accept the premise that you don't know what's going to happen going forward, which hopefully, hopefully through this podcast, you've come to that realization, we don't know what's going to happen over the next month, then you plan for multiple futures and you diversify your portfolio appropriately to account for those multiple futures. And if you build your portfolio that way, if you build that safety or that lack of a hundred percent confidence and that lack of putting all your eggs in any one basket, if you build your portfolio and your life that way, then you will be successful over time.
Colin White:
The secret to investing is not getting it absolutely right. It's about not getting it wrong. Avoiding things like the Bitcoins of the world, avoiding things like marijuana, avoiding the fads. If you can avoid those things, there's your financial success, because chasing those things will lead to financial collapse at some point. Because even if you get a bunch of them right, you're eventually going to get one wrong. It's not sustainable. So again, stay diversified and stay humble and listen when the world reminds you of something that you should know.
Josh Sheluk:
And with that note, I can't wait for next podcast because, just a teaser here, we're going to be talking about cryptocurrency.
Colin White:
Oh no. Oh no.
Speaker 1:
This information has been prepared by White LeBlanc Wealth Planners who is a portfolio manager for iA Private Wealth. Opinions expressed in this podcast are those of the portfolio manager only and do not necessarily reflect those of iA Private Wealth Inc. iA Private Wealth Inc is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. iA Private Wealth is a trademark and business name under which iA Private Wealth Inc operates.
Colin White:
We've noticed something. It seems there are a lot of people who would rather try to figure out their lives with an online calculator than air your finances to a human. Stop doing that. You need to talk to someone who can help direct you, tell you where to start with what you've got to make the biggest impact on your future. You can't figure that out at doihaveenoughcash.com, but you can figure it out by chatting with us. Call us. It'll be okay. You'll see.
Speaker 1:
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