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If you’ve looked closely at your financial statements recently, you probably found yourself thinking: “This can’t be possible.”

Well, it is. Unless you’re heavily into energy stocks or out of the market entirely, the value of your portfolio has probably dropped by thousands, perhaps tens of thousands of dollars this year.

Despite a welcome two-day rally, all the S&P/TSX sub-indexes except energy and consumer staples are in negative territory – and consumer staples is only barely positive.

With bonds experiencing what some analysts are saying is their worst year in modern times, there’s been nowhere to hide. Unless you’ve been shorting the market – a tactic only steel-nerved investors should use – it’s been a grim year.

Ironically, the S&P/TSX Composite Index is not technically in a bear market – a drop of 20 per cent or more from its high – and never has been this year, thanks to energy. It’s in the supposedly less painful correction mode – a drop of 10 per cent plus. The Dow is in a similar situation.

Apart from energy stocks and a few aggressive hedge funds, only dull, conservative GICs are profiting from the current turmoil. As interest rates rise, returns from guaranteed investment certificates move higher, although not in lockstep. If you have any spare cash available, Oaken Financial is offering 4.7 per cent for one year on a $1,000 minimum investment. You can get 4.65 per cent at EQ Bank for as little as $100.

Gordon Pape: Portfolio advice for what’s turning into a grim autumn for investors

Despite the sporadic rallies we have seen, it looks like the downtrend will continue for a while. Interest rates will keep rising and we have not yet reached what is known as the “capitulation” stage of the market cycle – the point at which investors lose all hope of recovery and sell at a loss to avoid further pain. Most, although not all, bear markets end with this type of massive sell-off.

Capitulation is usually the sign of a market bottom and an opportunity to buy shares at huge discounts. That’s what happened in the winter of 2009. Hope gave way to despair, some investors sold everything, and the foundations of a new bull were laid.

There’s no way of predicting how long it will take to reach that point (or if we actually will) and the wait will be painful. As Investopedia says: “There is no magical price at which capitulation takes place. Often, investors will only agree in hindsight as to when the market actually capitulated.”

In the meantime, if you are holding stocks you don’t wish to retain for the long term, sell into rallies like the one last Friday. Invest the proceeds in one-year GICs or, if you want to retain flexibility, high-interest savings accounts. HSBC has a limited-time offer of 4.25 per cent on its High Rate Savings Account. If you maintain a daily balance of $25,000 or more, that rises to 4.75 per cent. Check with the bank for more details.

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