Stay put and don’t panic. That’s the advice from chief investment officers at two Canadian investment management firms.

“It’s a time to sit back and ride out the storm,” said Fred Pynn, CIO at Bissett Investment Management.

Pynn, along with Brent Smith, CIO at Fiduciary Trust Co. of Canada, offered their views on investing in volatile markets during a conference call this morning.

“The biggest mistake that investors make is overreacting to short-term market volatility,” said Pynn. “That has probably the biggest negative impact on long-term wealth to investors.”

Smith says its not only investors who get respond too quickly. “There are a lot of investment professionals that react to every piece of economic data that comes out as well,” he said. He says the worst is likely behind us, and the majority of the downturn is in the past.

“It’s not a time to be making rash decisions,” echoes Pynn. “ You don’t want to be caught up in the volatility of this market and find yourself in a panic selling on a bad day only to watch the market recover.”

Pynn said Bissett tends to be “generally wary of the commodities,” and especially so now with the slowdown in the United States. “Weakness in the U.S. is emanating out,” he said. “There are indications that growth is slowing in Europe and elsewhere in the world. If this trend continues, we would expect to see pressure on commodity prices. We have already seen some commodity prices peak out and roll over — the base metals appear to have seen their peaks in 2007.”

He points to high-quality companies outside the resource sector that have seen substantial selloffs since last year — he’s “stunned” at the price Rogers Communications is trading at, for example. “It’s just one example of the many stocks outside the resource complex that’s experienced very sharp share price declines,” he said.

Smith, also lead manager for Quotential, a Franklin Templeton wrap program, said last year was one of the most difficult yet. “Performance was pretty mixed during the year, he admitted. “Our balance growth –which is our flag ship fund — was down 0.2 % for the year.” He says Quotential has trimmed its allocation to Canadian equities and are looking to diversify outside of the Canadian market.

Pynn agrees that looking outside of Canadian markets is key. “This is a time for Canadian investors to take a hard look at their asset allocation with respect to domestic and international—both domestic versus the U.S. market and domestic versus international markets,” he said.

Overall, however, the Canadian economy is doing fairly well, both CIOs agree. Pynn says that the healing in the U.S. has already begun — spurred by the Fed’s interest rate cuts — and the market is already looking beyond all of this. “Whether or not we have a recession in Canada is almost moot,” he said. “The market has discounted a severe economic slowdown and it may have already discounted a mild recession.”