Caution Detour Ahead

All of a sudden, the traffic slows down and we are detoured onto a gravel or washboard road full of potholes. As soon as we leave the comfort of the paved road, we make sure the windows are rolled-up, the air conditioning is on re-circulate and then we hold on.

Many of us have experienced the challenge of navigating around potholes before or the jawbone breaking or teeth rattling experience of hitting one. And if you do hit one, the jolt can damage your tires, rims, suspension and other steering components as well.

Common problems from potholes include sidewall bulges, tread separation or a puncture. You might also experience uneven wear on your tires with the wheel alignment being knocked out of position by the pothole, or damage to the rims due to a large or deep pothole.

So what is a pothole anyway? Technically speaking, they are holes in the roadway that vary in size and shape. They are caused by the expansion and contraction of ground water after the water has entered into the ground under the pavement. When water freezes, it expands. If the water freezes and thaws over and over again, the

pavement will weaken and continue cracking. Even in warmer climates, potholes can occur from erosion under the roadbed from excess rain and the weight of the traffic.

You can see how this might serve as a good analogy of what happens from time to time in the financial markets. We set out in a certain direction travelling within the posted speed limit on a beautifully paved road. After a while, we become complacent and get lulled into a false sense of security and then we hit a 10% market correction/pothole.

Potholes, like market corrections, are not unusual and on certain roads or at certain times of the year, they are almost considered normal so if you are paying attention, you can steer around most of them or use them as an opportunity to develop a better new path. If you are going too fast though or not paying attention when you hit one, it could be worse.

The takeaway here is simple: Potholes are normal so be prepared to hit one from time to time and, before you set out to travel anywhere, be sure of your destination; choose the wisest route; drive within the speed limit and have a well-maintained vehicle. Don’t be frightened to ask for directions before you leave and, if you do get lost or your car breaks down, enlist someone you trust (aka your advisor – or mechanic, if indeed the problem is with your car) to help guide your way.

If you do all of those things, a pothole will not stop you from getting to where you want to go.

David J. Angas, CEA Senior Financial Advisor
Family Wealth Counsel Advisor Group/Raymond James Ltd.

The views are those of the author, David Angas, and not necessarily those of Raymond James Ltd. Investors considering any investment should consult with their Investment Advisor to ensure that it is suitable for the investor’s circumstances and risk tolerance before making any investment decision. Raymond James Ltd. is a Member - Canadian Investor Protection Fund.