Navigating Through Uncertainty

In August, Crew Dragon made history as the first crewed orbital flight using a commercial spaceship. It was a true lesson in navigating through uncertainty. The landing was highly automated compared to previous space missions, slicing through the atmosphere at 27,000km/hour in 1,900°C temperatures before slowing to 30km/hour for touchdown in the Gulf of Mexico.

Today, as a result of the pandemic, we find ourselves similarly navigating through uncharted territory. We have entered a new era of digitization, deglobalization and debt.

Technology continues to drive the speed of change. While it has helped to keep economies from completely shutting down during the pandemic, it has also changed the way many of us live, adapting work and play to the confines of our homes.

The pandemic has also accelerated the trend towards deglobalization, exposing nations’ over dependence on global supply chains. Over the summer, the U.S. continued to take actions to protect its national interests, reimposing tariffs on Canadian aluminum, which were then
lifted in September, and instigating further trade tensions with China.

In order to support economies, the world has become substantially levered. Debt can be helpful when it is used to finance productive assets and generate new wealth to help economies grow. But problems can happen when debt is overextended. While stimulus efforts have helped to prop up economies and asset prices during these difficult times, many questions remain. As stimulus measures wind down here at home, how will the economy acclimate to significant levels of debt? What will drive economic recovery going forward?

For many investors, today’s concerns are likely different than those of the spring. The rebound of equity markets after the March lows created a disconnect between equity market performance and what was happening on the ground. Will the markets continue to push ahead? The more recent volatility we have seen in the markets should be expected during this particularly uncertain time. While we have experienced deflationary pressures in recent months, some wonder if inflation is an impending longer-term threat.

Given the continuing uncertainty, over the summer gold hit all-time highs. South of the border, the value of the U.S. dollar has been falling. U.S. containment efforts have been slower than expected, hampered by social and civil unrest. With just weeks until the Presidential election, all eyes will be on the U.S. as a change in leadership may be imminent.

During periods of extreme change, it is more important than ever to take advantage of professional advice in managing financial assets. Investing requires shifting gears on a continuous basis, particularly in assessing new situations. Fast-moving markets can mean additional risks, so careful review and monitoring of investments is vital. Balancing portfolio exposure to account for the many risk factors and potential economic outcomes can ensure that investing for the long term remains a profitable strategy.

As the successful return of Crew Dragon should remind us, overcoming uncertainty is often necessary for us to advance and progress. We continue to harness the inevitable changes so that your investments continue to work for you.

This article was originally published in the newsletter, "Challenging the Trend." Click here to view.

The views expressed are those of Wes Ashton, Director of Growth Strategy and Portfolio Manager, and not necessarily those of Harbourfront Wealth Management Inc., a member of the Canadian Investor Protection Fund.