As the coronavirus continues its global spread, Canadians are worried not only about their health but also about their retirement plans. Many people’s hard-earned investment portfolios have already taken a beating as stock markets plummeted this week over concerns of the virus’s impact on the economy.
“This is nuts,” said Jim Allen of Toronto, a 74-year-old retired IT consultant who relies on his investments for the majority of his income. Even so, he’s decided not to worry about the spiralling stock market
“Keep your head in the sand and hope it’ll go by,” said Allen about his current coping strategy. “I’m not going to panic and start selling things, because that’s when you do take a loss.”
Investment strategists would say Allen is smart not to panic.
“I don’t think worrying helps one make sound, logical decisions,” said financial planner Rona Birenbaum.
But is Allen making the right decision by holding onto his investments? Financial experts CBC News interviewed said that all depends on your immediate needs, your long-term plans and your ability to stomach volatile markets while the coronavirus continues to wreak havoc.
How long will this go on?
For people who hope to sit out the current economic crisis until their investments recover, the question remains: How long can you wait?
Birenbaum said that during the 2008 financial crisis, investors who sat on the sidelines waited about four years to recoup their losses. But she said they fared much better than people who panicked and sold their stocks at low prices during the downturn.
“The people that sold, they’ve probably still not recovered, quite frankly,” said Birenbaum, of the Toronto firm Caring for Clients.
Doug Porter, chief economist at Bank of Montreal, agrees that now isn’t the time to start dumping stocks — as long as you don’t immediately need the cash.
“It really doesn’t make sense at this point to be an aggressive seller if you have a longer-term time frame.”
Jim Allen of Toronto checks out his current investment portfolio. Even though he’s taken a big hit during the coronavirus outbreak, he said he’s not panicking. (CBC/Oliver Walters)
Porter notes the current market dive was triggered by an intense Wednesday that saw the World Health Organization declare the coronvirus a pandemic, the NBA suspend its season, and U.S. President Donald Trump announce a confusing European travel ban that failed to calm the concerns of investors, who were hoping to hear about a plan to steady the economy.
“That’s a lot for any investor to absorb in a 24-hour period,” he said. More cancellations followed Thursday, including the NHL and the Juno Awards.
Despite the coronavirus’s continued spread, Porter believes its toll on the economy will be short-lived. He predicts the recovery will reflect the shape of a V or a U, meaning the economy will stabilize by the end of the year.
“Hopefully, a lot of the bad news is now out there and absorbed,” he said. “We continue to believe that when the storm passes, things will revert to some kind of normality relatively quickly.”
The worst is yet to come?
Birenbaum agrees that the economy will eventually recover and estimates it could take one to two years.
But in the meantime she suggests the coronavirus fallout could send markets down another 20 to 25 per cent.
“Remember, this virus is just getting wound up here in North America,” she said. “There’s very little travel, nobody’s going to restaurants, universities are being shut down — I mean, the whole economic engine has just gone from sixth gear into first gear.”
Financial planner Rona Birenbaum says the coronavirus fallout could send markets down another 20 to 25 per cent, and she estimates the economic recovery could take one to two years. (Yanjun Li/CBC)
For those who feel they can’t stomach the wild ride and want to sell some stocks, Birenbaum suggests they consider acting now rather than when the market takes what she expects will be another hit.
“You don’t want to be making your situation worse than it is.”
She also suggests that investors consider re-balancing their portfolios to focus on strong companies with healthy balance sheets that can weather the current coronavirus storm.
“You want to make sure that your portfolio is comprised of the strongest, most dominant companies,” she said. “Smaller and weaker companies will either potentially go bankrupt, be bought out at a discount by the stronger players or simply limp along for a number of years.”
A buying opportunity?
While nobody relishes profiting from a pandemic, investors who have cash or can liquidate some fixed-income investments may see this moment as an opportunity.
Financial expert Robb Engen warns potential investors to first evaluate how long they’re willing to wait for a financial recovery before they start pouring cash into the markets.
“Young investors in their accumulation years, they can certainly view these types of corrections as a real buying opportunity,” said Engen, a financial writer and fee-only investment adviser based in Lethbridge, Alberta.
But he said the same strategy may not work for an older investor — someone who can’t afford to wait for the anticipated recovery.
“What if things don’t work out the way I planned? Now we’ll have to be selling stocks at a loss just to fund my retirement.”
That’s exactly what retired investor Allen plans to avoid. He says he isn’t making any rash moves on either the buying or selling side and instead is waiting it out for better days ahead.
“I think this will come back. We just don’t know when.”
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
