How do you mend a broken market?

The events of the past few months have been startling, to say the least. We’ve seen the U.S. government take control of mortgage giants Fannie Mae and Freddie Mac, and long-standing financial institutions such as Lehman Brothers and AIG topple. We’ve seen markets soar and fall with alarming alacrity as the U.S. credit crisis became a global affair. And we’ve seen some hope in the form of the Wall Street bailout package, along with concerns that it may not be enough.

In an economic environment that some are comparing to the Great Depression, everyone’s wondering when it will end—and, in the meantime, just how bad it’s going to get.

Our Top 40 Money Managers Report paints a dark picture. More than half of the managers had negative growth over last year—the most losses we’ve ever reported—and assets are down by 4.1% overall. Most of the few managers that did have gains had growth in the single digits, evidence that the trials and tribulations in the U.S. are taking their toll on Canada as well.

But does this mean that we’ll suffer the same fate as our southern neighbour? Not necessarily. For one, our economic situation isn’t the same. Finance Minister Jim Flaherty has taken care to remind us that Canada’s mortgage market isn’t crippled and that our financial institutions are well capitalized and less leveraged.

There may even be a bright side. Some of the money managers we spoke with suggested that there are opportunities to be had in the current crisis. And all agree that the present storm will pass—it’s just a matter of time.

So, what can we do to ride it out? From an investor’s perspective, industry experts remind us that retirement is a long-term goal, not a short-term opportunity. Markets will move up and down, but investors should stay the course and avoid overreacting.

From a plan sponsor’s perspective, good governance and communication are critically important. Giving members information and tools to help them understand the situation may prevent them from making rash moves at the wrong time.

The bad weather will likely continue for some time yet. But perhaps even the darkest “perfect storm” cloud has a silver lining.

Alyssa Hodder is the managing editor of Benefits Canada.

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© Copyright 2008 Rogers Publishing Ltd. This article first appeared in the November 2008 edition of BENEFITS CANADA magazine.