Clark Wealth Management Group - ScotiaMcLeod Fredericton

Good Riddance to 2009

I was among those who were thrilled to see the 2009 pass into history last night. Despite the impressive rally in some equity market indices, when combined with 2008 (which it must be from an investor’s standpoint), 2009 was one of the worst years I’ve seen in my 29-year career.

It was in late 2008 and early 2009 when nearly every financial analytical method and resulting decision relied on since the beginning of time stopped working. Imagine if our recent financial challenges had been medical instead of financial in nature. It would have meant that everything doctors knew about diagnosing and treating patients stopped working. It was surreal to say the least.

Thankfully, the tools of the trade have begun to function again. Economic and financial data is being digested by market participants in a more predictable way. Analysis techniques have begun to function again and predictability of investment outcomes has largely returned.

That’s not to say that the short-term direction of any equity market is any more predictable than it ever was – that has never and will never be predictable. It is clear though, with much of the once astronomical leverage removed from the world financial system, business outcomes over the longer-term now make sense again.

The regulatory regime in place now and currently being developed in derivatives markets where securities like Credit Default Swaps are traded, is more robust than was previously the case. Those involved in regulating markets and participants have committed to enforcing the rules. While regulations alone won’t make investing risk-free, focused attention on regulation can’t help but improve things for investors.

There has also been a bit of a Darwinian style cleansing in the financial advisory industry during this past couple of years. Some financial advisors found themselves unable to succeed in the more challenging environment. Once again this won’t make investing risk-free for investors, but dealing with a more experienced, established advisor or team can’t help but improve the quality of the advice people receive.

Our outlook for the year we started today is far more optimistic than it was at this time last year. Although we remain cautious about many things going on around the world, we believe 2010 will be a moderately good year for investors. We think people will be rewarded this year and beyond for sensible decisions made around critical matters like diversification, asset allocation, and a bias for high quality investments.

Those who play the market using short-term trading strategies will have a more difficult time ahead. My dad always made it clear that there are no shortcuts in life and that certainly applies to investing. People must be cautious not to confuse good luck with good management. A systematic, disciplined approach will be needed to succeed in the coming year and beyond.

In formulating your approach to financial matters for this new year, be sure to check with your own advisor, and some of the great tools available on-line for this purpose. One I recently became aware of can be found at http://helpmeinvest.scotiabank.com/. After you’ve finished the paper, why not take some time and check it out.

Happy New Year 2010.

Keir Clark, is a senior wealth advisor, with Clark Wealth Management Group and branch manager at ScotiaMcLeod in Fredericton, NB. He can be reached online at www.keirclark.ca or by telephone at 506-450-6465.

Information and opinions contained herein have been compiled from sources believed reliable but no representation or warranty, expressed or implied, is made as to the accuracy or completeness.