Keeping Volatility in Perspective

Should I make any changes in my investment portfolio?

Clients should consult with their financial advisor if their investment plan has changed, however we typically do not recommend making any changes unless your financial objectives have materially changed. Corrections are a natural part of the investment cycle and over the long term, investors who stay invested and use volatility as an opportunity to buy are rewarded. The chart below highlights the risk of missing out on the best equity market days, which often come after large declines.


Don't miss the best equity market days

Source: Morningstar, CI Investments. S&P 500 TR in USD from January 1, 1990 – December 31, 2019 using daily returns.


How have markets reacted to virus outbreaks in the past?

The chart and table below highlight how the S&P 500 has performed during similar virus outbreaks in the past. While the market impact can be negative, the duration of the drawdown has been inconsistent, and the long-term impact has been limited. In all past scenarios, markets were higher 12 months after the virus was identified.

S&P 500 Index and Virus Outbreaks

Virus Start Date End Date Trading Days S&P 500 Return 12-month Return
SARS Jan-03 Mar-03 38 -12.8% 32.2%
Avian Flu Jan-04 Aug-04 141 -6.9% 4.4%
MERS Sep-12 Nov-12 43 -1.3% 16.7%
Ebola Dec-13 Feb-14 23 -5.8% 16.7%
Zika Nov-15 Feb-16 66 -12.9% 5.7%
Coronavirus Jan-20 Present 28 -10.3% N/A

Source: Bloomberg Finance L.P., CitiResearch, FactSet. As at February 27, 2020. The starting date for the 12-month return is the month each virus was identified.

IMPORTANT DISCLAIMERS

This document is provided as a general source of information and should not be considered personal, legal, accounting, tax or investment advice, or an offer or a solicitation to buy or sell securities. Every effort has been made to ensure that the material contained in this document is accurate at the time of publication. Market conditions may change which may impact the information contained in this document. All charts and illustrations in this document are for illustrative purposes only. They are not intended to predict or project investment results. Individuals should seek the advice of professionals, as appropriate, regarding any particular investment. Investors should consult their professional advisors prior to implementing any changes to their investment strategies.

Certain statements contained in this communication are based in whole or in part on information provided by third parties and CI Investments Inc. has taken reasonable steps to ensure their accuracy.

Certain statements in this document are forward-looking. Forward-looking statements (“FLS”) are statements that are predictive in nature, depend upon or refer to future events or conditions, or that include words such as “may,” “will,” “should,” “could,” “expect,” “anticipate,” “intend,” “plan,” “believe,” or “estimate,” or other similar expressions. Statements that look forward in time or include anything other than historical information are subject to risks and uncertainties, and actual results, actions or events could differ materially from those set forth in the FLS. FLS are not guarantees of future performance and are by their nature based on numerous assumptions. Although the FLS contained herein are based upon what CI Investments Inc. and the portfolio manager believe to be reasonable assumptions, neither CI Investments Inc. nor the portfolio manager can assure that actual results will be consistent with these FLS. The reader is cautioned to consider the FLS carefully and not to place undue reliance on FLS. Unless required by applicable law, it is not undertaken, and specifically disclaimed that there is any intention or obligation to update or revise FLS, whether as a result of new information, future events or otherwise.

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Published February 28, 2020