This market is defined by uncertainty, Myles Zyblock says

You might not know it from the healthy market gains in recent months but the global economic forecast is still full of uncertainty, with a wide range of possible scenarios that could play out over the next 12 months. That makes for a risky investment environment, says Myles Zyblock of Dynamic Funds, who argues that diversification in your portfolio and sticking to your game plan are keys to surviving the current crises.

It’s been a wild few months in the markets, to say the least. The steepest drop in decades followed by the largest rally on record have made for strange times, what with so much still unknown about if and when economies worldwide will get back on their feet.

COVID-19 has brought about massive unemployment in Canada, the US and around the globe and the virtual destruction of sectors of the economy such as tourism, the airlines, hotels and restaurants. Small businesses are folding by the bushel and governments are printing money at top speed to staunch the bleeding.

Yet you’d be hard-pressed to read those grim realities from recent market activity, where major indices have risen strongly over both April and May and have been heading higher to start off June, as well. Over that period, the S&P 500, for one, has ballooned by 38 per cent, gaining back almost all of the ground lost in February and March.

That translates into a lot of optimism about an economic recovery which is far from certain, says Zyblock, chief investment strategist at Dynamic Funds, who spoke to BNN Bloomberg on Tuesday.

“The potential scenarios or outcomes out there are very wide, and so you have to respect that, in essence, we are reopening [the US economy] here but we are still susceptible to a renewed wave in the virus,” Zyblock said.

“At the same time, you can think there are a lot of really brilliant research scientists out there working on a vaccine. So, the outcomes vary widely where we could be stuck back in lockdowns or we could have a vaccine. So you have to approach this situation with that understanding so you’re not getting over your skis too much when you’re positioning portfolios,” Zyblock said.

Zyblock said there has been a recent interest in not pandemic-proof stocks but pandemic-prone areas of the market where investors are now betting on a strong comeback.

“Hotels, autos, airlines, casinos — people are finding a little bit of interest in these names again and I think part of that is because you know we’re seeing a gradual and consistent reopening of economies both at home and abroad and that brings the interest back into some of these really beaten-down names,” Zyblock said.

Ultimately, Zyblock advises investors to be thinking about their overall investment game plan and to prepare for troubled times ahead by keeping diversity in mind.

“There’s still a lot of uncertainty and a lot can still go wrong but some stuff could still go right as well,” Zyblock said. “In a scenario like this, I think the bottom line for any investor is to remember why they’ve invested in the assets they have, why they have the strategic plan they have, and to stick to that strategic plan.”

“Remember, diversification is that admission that the future is an uncertain place so having a well diversified portfolio, I think you can’t beat that,” he said.