The October edition of The Informed Investor shares an updated investment outlook and puts recent economic and market news into the context of your long-term investment goals.

Evolution has primed our brains to stay alert to possible signs of danger in our environment. And in the environment in which our brains evolved, there was little cost to overreacting to possible danger.

If you ran away from a rustle in the bushes that turned out to be a chickadee, you likely just got some extra exercise. In the scenario where this run allowed you to avoid encountering a lion, the payoff was huge, so the risk of a little exercise was well worth it. Your genes would go on to live another day — that much closer to making it to the next generation.

Our environment looks very different now, but our brains may not have changed much. If you’re committed to being a long-term investor, it’s key to properly contextualize the possible signs of market danger so that you can avoid running away from your investment plan long enough to reap its benefits.

RBC Global Asset Management’s (RBC GAM’s) Fall 2021 Global Investment Outlook¹ gives some context to factors that are creating uncertainty in markets: the more contagious Delta variant, anticipated government policy changes, and inflation.

Growth in the global stock market hit pause over the last couple of months, partially driven by the spread of the Delta variant. RBC GAM’s chief economist Eric Lascelles also noted that “It was inevitable that the rate of economic growth would decelerate somewhat, as the pace over the past 16 months has been remarkable and economies have already significantly eaten through their excess capacity.”¹

Many governments have introduced vaccine passports and mandates to contain the recent surge in COVID-19 cases. These measures may be positive for continued economic activity, but it remains to be seen if these measures will prove as effective as more broadly restrictive lockdowns.¹

Inflation has continued but largely affects goods and services that have been in high demand during the pandemic: shipping, used cars, housing, and computer chips.¹ Although higher inflation readings may continue for a few more years, structural forces like technological advancement work to lower the price of goods and services over the long-term.

Markets are closely watching the evolution of monetary and fiscal stimulus programs as the economy and labour market improves and governments look to decrease spending. Consumers still have high levels of excess savings accumulated during the pandemic — if this savings begins to be spent more readily, it may cushion the removal of government stimulus.

Zooming out from the short-term to the medium-term, we can appreciate the significant gains in equity markets globally. The US, Canada, International, and Emerging market equity indices are all up significantly from their pre-pandemic highs. But the most important perspective will always come from zooming out to the long-term, or to your chosen investment time horizon. This is the perspective from which the RBC InvestEase portfolios were created. Our portfolios are designed to weather many different market environments — whether you intend to invest for a few years, or for decades.

Interested in reading up on a few other events affecting markets? Our RBC partners recently wrote a couple of pieces on the relevance of the recent Canadian federal election to your portfolio,² as well as the development of the potential default of China’s largest property firm, Evergrande.³