Look for this market roller-coaster ride to continue

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Global markets once again are under pressure.

This time, it is news from North Korea that has riled markets. Claims by North Korea that a hydrogen bomb has successfully been tested, creating a 5.1 magnitude earthquake, have investors on edge.

European markets closed lower on Wednesday. The German DAX, French CAC, and U.K. FTSE were all down approximately 1 per cent.

For North America, it means another turbulent day in the markets. In the U.S., the Dow is facing another day of triple-digit losses, declining approximately 1 per cent in midday trading. The S&P 500 index is also down approximately 1 per cent, struggling to hold above 2,000, a key technical support level. The Nasdaq composite is lower by 0.9 per cent. In Canada, S&P/TSX composite index is down 1 per cent.

Investors are running for shelter with this market turbulence. Gold, considered to be a safe-haven by investors, continues to catch a bid, rising $10, or 1 per cent, to over $1,088, and approaching $1,100, a key resistance level. Bonds are also on the rise with the U.S. 2-year treasury yield falling back under 1 per cent, and the 10-year Treasury yield falling back to its levels from mid-December.

A larger concern, that will not be quick to pass, is China and global growth concerns.

Decelerating growth from China, along with an oversupplied market, is driving the price of oil down to historical lows. The price of Brent oil, the global benchmark, fell below $35 (U.S.) a barrel, its lowest level in 11 years. While the price of West Texas Intermediate oil, the North American benchmark, plunged over 4 per cent to $34.35, near a 7-year low. This is despite what would normally be bullish news for oil with U.S. weekly oil inventory data released from the U.S. Energy Information Administration showing a drawdown in inventories compared to expectations of a build.

A key concern is that the Organization of the Petroleum Exporting Countries (OPEC) will continue to pump more oil into the market to protect their market share and generate much needed money for their countries, while demand is unable to expand at a similar pace. China is the second-largest consumer of oil in the world.

Falling oil prices is driving the Canadian dollar down, now below 71 cents per U.S. dollar, its lowest level since 2003, with near-term upside potential seeming challenging. The economics team at BMO Capital Markets is forecasting the Canadian dollar to fall to an average of 70.3 cents per U.S. dollar in the second quarter of 2016.

Meanwhile, the U.S. labour market continue to show strength; however, this creates a problem for investors as strong employment is supportive of further rate hikes. The December ADP employment report was solid, showing private sector job growth of 257,000 jobs, topping expectations of 198,000. Investors will be looking to Friday's non-farm payroll report for evidence of continued momentum.

The volatile pattern of rallying and retreating that we experienced in 2015 remains in full-force.

Last year, the Dow Jones Industrial Average and the S&P 500 index finished the year relatively unchanged from the prior year but within the year realized sharp moves. This pattern of sometimes violent market moves remains in effect because we have unsteady global economic conditions combined with geopolitical risks continually resurfacing. However, keeping this in perspective, while it has been a turbulent start to the new year, the negative news headlines that are creating fear and worry in the markets, have caused the S&P/TSX composite index to fall less than 2 per cent over the past three trading days.

Earlier this week, the International Monetary Fund's chief economist, Maury Obstfeld, highlighted China's slowing economy as a key concern in 2016, potentially creating global economic growth uncertainty and instability.

Mr. Obstfeld remarked that of the key issues investors should monitor in 2016, "China will remain high on the list. Its economy is slowing as it transitions from investment and manufacturing to consumption and services. But the global spill-overs from China's reduced rate of growth, through its diminished imports and lower demand for commodities, have been much larger than we would have anticipated. Serious challenges to restructuring remain in terms of state-owned enterprise balance sheet weaknesses, the financial markets, and the general flexibility and rationality of resource allocation. Growth below the authorities' official targets could again spook global financial markets — but then again, time-honored methods of enforcing growth targets could simply extend economic imbalances, spelling possible trouble down the road."

He also highlighted the global economic growth concerns, stating, "The U.S. economy continued its solid growth and job creation, while Europe generally picked up speed and Japan remained a question mark. But with some exceptions (such as India), emerging and developing countries continued to slow in the face of falling commodity prices and tighter financial conditions, and synchronized and sustainable global growth remained elusive."

A key takeaway in his message is, "sustainable global growth remains elusive." Investors do not like uncertainty and instability, and this is fuelling equity market volatility. As a result, in the near-term, expect the pattern of rallies and retreats to continue into 2016, and for it to be a challenging market for investors with careful stock selection required.

Investors can benefit from this market fear and volatility by purchasing shares with a staggered approach of fundamentally strong companies that have elusive growth profiles.

Next Monday, the U.S. earning season kicks off, and those companies that deliver growth, beat expectations and provide positive outlooks will be rebound and rally higher.