While some people are watching the American economy in shock, others are heading to their financial analysts with cheques in hand.
On Monday, the Toronto Stock Exchange dropped the most in its history, falling 840.93 points.
It did bounce back a bit Tuesday, but opened down Wednesday on another volatile day as investors held their breath and awaited another vote on a bailout plan for U.S. financial institutions.
David Karas, certified financial planner and president of Money Concepts in Barrie, said some of his investors are eager to buy up quality assets right now.
“The volatility we’re experiencing in the market is because of structure, it’s not investment-driven,” said Karas, adding it’s difficult to make investment decisions when the structure of the stock market is being challenged.
He explained the structure is toppling because some U.S. financial institutions have failed south of the border, causing people to lack confidence in banks.
The record for the biggest TSX drop was set Oct. 25, 2000 with a fall of 840.26 points.
Being blamed for Monday’s drop was the United States’ rejection of a $700-billion financial bailout package.
“We’ll have to see what the political solution is first, and that solution will push the market one way or another,” said Karas.
He said another factor to the unstable stock market is the elections being held in Canada and United States.
For local investors, this situation can mean taking some big risks that may pay out in the end.
Karas has seen more clients at his business this week to buy stock when it’s low.
“There’s a huge opportunity globally now. This is the biggest price reduction in 100 years. We recommend if people are buying, to invest across the board in quality assets.”
But if investors are confused, they should hold onto their assets. Those assets will worth much more when the stock market recovers and normal conditions return.
Karas said Canada’s economy is weakening and the signs are there to prove it.
“The dollar fell, housing prices fell and energy costs fell. The Canadian government also didn’t raise interest rates.”
As the Canadian economy is oil- and energy-sensitive, the country’s profitability will also decrease if those prices slow down.
“Therefore, our economy won’t do as well.”
