Market Commentary

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Q2 Review - Market Commentary 2015

In light of the recent market volatility, I wanted to provide a summary of what has been happening and discuss the opportunities that arise when we see this type of activity. The gyrations in the markets over the last month or so are predominately due to two main events that have occurred. The first event is the Greek debt crisis and the uncertainty surrounding that, and the second has been the large correction that has taken place in the Chinese stock market, which began in June but has really gained momentum over the past month.


When we look at the Greek debt crisis, there was initially some panic in the markets when the Greek Prime Minister rejected the debt repayment proposal from Greece's European Union creditors in favor of putting the proposal to a referendum to be voted on by the people of Greece. That vote took place on July 5th and we know that the people voted "No" to the proposal and so Greece had until July 12th to present an alternative solution to their creditors – their last chance to strike a deal and avoid a forced exit from the single currency zone. Eurozone leaders struck a potential bailout deal for 86 billion euros over three years. The bailout would be conditional on Greece passing agreed reforms, including implementing measures to streamline pensions, raise tax revenue, and liberalize the labour market.


The second event that had upset the market this month, and is arguably larger than the Greek issue, is the fact that the Chinese market correction that began in June has really picked up speed. The headlines read things like "The Chinese market is going to collapse", and other attention-grabbing negative statements. The truth is that while it is a correction and the sell-off has been swift, it is hardly something that is going to cause a complete collapse in China and thereby spread to the rest of the world. The reality is that from January to June of this year, the Chinese stock market was up more than 45%; that is simply unsustainable by any stretch of one's imagination as if that were to continue it would mean their market would have almost doubled in one year! Whenever a market rises to such an extent in a short period of time it is bound to have a correction that will also be swift & steep and that is exactly what we are witnessing.


With respect to the portfolios I have constructed for my clients, they are always set up to be either of a conservative or balanced nature, and proper diversification means they have limited exposure to the Chinese or Greek markets, (somewhere around 4-6%, depending on the portfolio). In fact, this recent volatility is giving the investment fund managers an opportunity to increase some of their positions in quality companies – those whose stock prices have declined simply due to the uncertainty in the markets. These businesses have not seen any real change in their fundamentals, management, or product that would justify a reduction in the stock price. The fund managers are using this to their advantage and acquiring more stock at cheaper prices and it will be very beneficial to the portfolios when the market stabilizes and moves forward again.


Like all other times when we have seen this type of activity in the markets, it will calm down and things will get back to normal as the situations get resolved. As investors, it is so important not to lose sight of our original objectives and get caught up in the hype of the media headlines during these times. Stay calm, keep focused, and look to these times for what they are – opportunities to purchase great businesses at a discount!


All the best,

Anthony Ciccone, B.Comm,CHFC


PS: Diversification amongst asset classes and sectors is a key component in managing risk and volatility within your investment portfolio. If you would like to review your exposure to the global markets, give us a call today at 604-688-5262 for a comprehensive discussion.




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Ciccone/McKay Financial Group is an independent financial services firm with over 75 years of combined experience in the areas of risk management, wealth management and employee benefits.


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