How quickly could investors see their portfolio performance recover? 

Equity market recoveries have taken various paths. Some have been short and sharp, like the post-COVID recovery. Others have been longer, such as the recoveries after the 2001 tech bubble burst and the GFC. For bond markets, the recovery precedents are fewer and more mixed.

In the middle of a market downturn, it’s tempting to lean towards pessimism and focus on how long and intense the pain of loss may last. We prefer to resist this urge. Instead, we consider the more productive and positive view, as we ask how quickly will equities and bonds fully recover all ground lost in 2022.

Last year’s market correction and continued high economic uncertainty mean investor confidence in the prospective performance of traditional Balanced portfolios may be low. Our analysis highlights a more optimistic perspective. Portfolios often recover relatively quickly. And as markets are always forward looking, the healing process frequently starts well before gloomy economic indicators give way to more positive data trends. This suggests investors will continue to benefit by avoiding the temptation to find short-term performance fixes. We suggest investors stay focused on their long-term goals and outcomes.

Bond yields have reached levels that make fixed income an increasingly attractive proposition and equity valuations have started to reach healthier levels. For these reasons, we think there’s an attractive opportunity for investors to stay invested during short-term volatility and begin to consider putting available capital to work.

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If you’d like to discuss emerging market debt investment opportunities or have questions about your investment portfolio, please reach out to your advisor or CIBC representative any time.