(February 28 – 08:40 ET) – Value investing guru Irwin Michael, portfolio manager ABC Funds, says he expects markets volatility to continue all year.

In his February commentary, Michael points out that the Canadian stock market has been transformed over the past month by the performance of Nortel Networks Corp. He notes that Nortel’s breakdown has shocked previously complacent investors and has had a tremendous negative effect on the TSE 300 Index. “The TSE 300 index has now fallen over 3,000 points to just over 8,000 from its late summer 2000 peak of 11,300. This 30% decline has deeply affected investor thinking about passive investing, indexing, and the merits of Nortel as a one-stock portfolio.”

Michael notes that the market decline has also spawned increased Canadian stock market volatility and recession fears. “While U.S. money supply growth continues to expand significantly and a growing sense that the U.S. Fed will do all in its power to prevent economic recession it is still too early to dismiss the possibility of economic slowdown.”

ABC continues to hold at least 15% in cash reserves, “as we prepare for continued share price volatility and potential purchase opportunities. While we continue to hunt for undervalued securities, we intend to remain cautious and alert to the extreme market fluctuations which we expect to last to at least the end of 2001.”
-IE Staff