Portfolio panic: How worried should I be about the stock market’s downturn?

Financial experts warn that taking drastic actions during a sudden stock market correction can have negative repercussions on your long-term goals.

With stock markets, cryptocurrencies and technology shares off to a rough start in 2022, financial experts say now is a good time for a gut check on your overall risk tolerance but not the best time to abandon your long-term investment strategy.

Markets have largely been in a downturn since the start of the year amid escalating tensions around Russia and Ukraine, the ongoing spread of the Omicron wave of the COVID-19 pandemic, and speculation that interest rates are set to rise amid rapid inflation.

The all-country index and S&P 500 have fallen roughly eight per cent so far in 2022, with the Nasdaq Composite set for its worst start to the year since 1980 as high-flying technology shares fall out of favour.

Shares in heavyweights like Shopify and Netflix have fallen more than 30 per cent since Jan. 1, for example, with drops of more than 10 per cent from Apple, Tesla and Facebook’s parent company, Meta.

The S&P/TSX Composite, the benchmark index for Canadian markets, has fared better so far this year but is still down 3.5 per cent from the start of the month.

Derek Dedman, portfolio manager at Watson Di Primio Steel Investment Management in Ottawa, points to the general “uncertainty” of the moment as the leading cause of the recent downturn.

The companies that have seen the most growth during the past couple of years — think tech, health stocks — are also those primed for contraction as the market regresses, he says.

“If certain areas were getting more hot than the others, then I think there’s a potential for them to cool down a little bit faster.”