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Coronavirus fears could impact your investment



Global stock markets are experiencing an uptick in volatility as investors speculate on whether the coronavirus outbreak will have long-term effects on the global economy.

So far, the North American markets are holding up well considering all the negative headlines, as both the TSX and S&P 500 remain positive for the year.

There were a couple days when we saw triple digit drops, but the selling pressure was short-lived. The indexes recovered over the next few days thanks to several high-profile companies exceeding their earning expectations.

The Chinese markets aren’t fairing nearly as well with China’s stock market off by nearly 10 per cent since the virus took off.

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Comparison to SARS, other epidemics

I’m often asked about the economic effects of the coronavirus and how it might compare to past outbreaks such as SARS.

It took six months before SARS was fully contained and during that time 8,000 people were infected in 29 countries, killing  774 people. From an economic standpoint the outbreak significantly impacted Asian economies, especially tourism, air travel, retail, real estate and food and drink industries.

Surprisingly the markets performed well following the SARS outbreak. The S&P 500 was up 20 per cent in the 12 months following SARS, and other outbreaks have experienced similar results. For example, the S&P 500 was up 18 per cent one year after the avian flu epidemic and 38 per cent after the swine flu epidemic.


(Source: Charles Schwab)


That said, I don’t believe there is a correlation between an epidemic and higher stock valuations.  I think it was lucky timing more than anything else. As an example, SARS occurred in 2003 soon after the tech bubble burst which caused the S&P 500 to drop by 49 per cent, so markets were extremely oversold and due for a bounce.

In looking at the historical epidemics — including Ebola, Zika, H5N1, H1N1, HIV, the pneumonic plague and MERS — on average the S&P 500 was up 8.5 per cent in the six-months following an outbreak.

Hopefully history repeats itself and a year from now we can say that the coronavirus’ economic effect on the North American’s stock markets was short-lived.


(Source: Dow Jones Market Data)


Short-term impacts

Over the short term, I expect more volatility with further drops in the Chinese stock markets, lower oil prices and a lower Canadian dollar as the epidemic will negatively impact global economic growth and commodity prices.

Money will continue to flow into traditional “safe-haven” investments like gold, bonds, the U.S. Dollar and Japanese Yen.

Once the virus is contained and life goes back to “normal,” financial markets have typically stabilized and areas of the market that might have been oversold due to panic selling recover.


World Health Organization officials discuss the coronavirus at a news conference in Geneva in January. (Martial Trezzini/Keystone via The Associated Press)


With every crisis there are also opportunities. For those needing to apply for, or renew, a mortgage we are seeing mortgage rates drop as money floods to the safety of the bond market.

As the coronavirus is bound to slow down global growth, the Bank of Canada might have to cut the benchmark interest rate to stimulate our economy. This will benefit those with variable rate mortgages.

If you have a long-term horizon and a well diversified portfolio, which should include some “safe-haven” assets to dampen your portfolio’s overall volatility, you should be fine over the long run.

Focus on what you can control

Rather than stressing over things that are completely out of your control, you would be better served focusing on areas that are in your control, such as updating your will, reducing debt, implementing tax-saving strategies or earning extra money. These actions will have much more impact on your financial health.

It’s a little more complicated for those with investment time horizons of less than three years. It might make sense to increase the allocation to “safe-haven” assets or implement a low-volatility equity strategy.

If you work with an advisor, now would be a good time to set up a meeting to review your options.

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Top Investing Trends For 2023 – Forbes Advisor




What a difference a year makes.

At the beginning of 2022, prices were spiking higher in the U.S. thanks to pandemic supply chain breakdowns and consumer bank accounts stuffed with cash.  Remote work seemed here to stay and unemployment was near all-time lows. For many, there was a real sense that the pandemic economic crisis was behind us.

Not every observer was so sanguine, however, and it didn’t take long for runaway inflation to become a major headache for markets and regular Americans.

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After some hesitation (remember transient inflation) the Federal Reserve pledged to crush rising prices by hiking interest rates. The stock market tanked, taking bonds along for the ride, making it a miserable year for investors.

With 2022 drawing to a close, the S&P 500 has clawed its way out of bear market territory but remains down 17% as of this writing. As we look ahead to 2023, here are nine investing trends that can help parse the cautionary tales from the opportunities.

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1. America Remains an Inflation Nation

Inflation was the economic glitter of 2022—it stuck to everything. From the gas pump to the grocery store to your 401(k), investors have higher costs and less valuable dollars to invest in the future.

The big question for 2023 is whether inflation will drop toward the Fed’s 2% target rate. Many experts suggest that’s unlikely, although it’s worth noting that the Fed’s six 2022 rate hikes will take a while to work their way through the economy.

Morningstar predicts that the Fed will ease monetary policy and lower interest rates to roughly 3% by the end of 2023. If that happens, it won’t help the inflation fight. That suggests that Treasury Inflation Protected Securities (TIPS) and I bonds should remain popular inflation-fighting investments.

2. The Bear Market Could Stick Around

The Covid-19 stock market rocketship crashed and burned. June 2022 ushered in the second bear market since 2020, sending investors scrambling for cover.

While stocks have officially emerged from the bear market in the second half of 2022, stock markets remain down by double-digits.

Ordinarily, bonds would take the edge off a bear market. However, aggressive interest rate hikes have bond yields falling along with stock prices. In the third quarter of 2022, the venerable 60/40 portfolio suffered greater losses than its stocks-only counterpart, causing questions about whether the O.G. portfolio needs to go.

Improving investor sentiment will likely be tied to easing inflation, so the year ahead could prove tricky for traditional asset allocation models.

While putting a “buy low” mantra into heavy rotation on your morning meditation playlist is never a bad idea, 2023 may prove that buy-and-hold investors need more than equities and fixed income to hedge against unpredictable markets.

3. Consider Alternative Investments

Speaking of broader diversification, 2023 holds promise for alternative investments finally earning a place in everyday investor portfolios.

The portfolio for 2023—no matter your net worth, risk tolerance, or time horizon—should include an increased allocation to alternatives. With their low correlation to traditional asset classes like stocks and bonds, alternatives could blunt inflation- and recession-induced volatility and buoy returns more than dividend stocks alone.

Previously reserved for accredited investors and seasoned traders, everyday investors can easily access alternative asset strategies like commodities and managed futures through a decent selection of low-cost exchange-traded funds (ETFs) and mutual funds.

While expense ratios trend higher than the average fund, the performance of alternative assets may outweigh the higher costs.

4. Savings Bonds Are Still Sexy

If there’s a silver lining to the inflationary cloud, it’s the newfound popularity of savings bonds—specifically Series I savings bonds. In April 2022, the I bond rate jumped to a historic high of 9.62%, contrasting the S&P’s year-to-date 15% decline.

Investors eager to lock in that phenomenal rate bought $979 million in I bonds on Friday, Oct. 28—the last purchase day before the semiannual rate reset—and crashed the Treasury Direct website. You’d think the U.S. Treasury was selling Taylor Swift concert tickets.

For those seeking alpha for their extra cash, I bonds at the lower (yet still phenomenal) 6.89% rate are available through April 30, 2023. While illiquid for one year after purchase, it’s tough to argue with a guaranteed rate of return backed by the full faith of Uncle Sam.

4. Watch Out for Layoffs

The hashtag of the year on social media could be #layoff. Since mid-November, tens of thousands of employees have been laid off from tech behemoths like Meta, Amazon, Lyft and Twitter.

While boldface tech names have seen very high-profile waves of labor force reductions, other industries have seen their own losses. Real estate startups like Better, Redfin and Opendoor have slashed headcounts as rising rates and home prices dried-up mortgage applications, closed sales and corporate revenues.

As cash-strapped public companies try to shore up their balance sheets ahead of a potential recession, the year ahead could see the undoing of the historically strong U.S. labor market. While experts predict that new college grads won’t be at a loss for job offers, entry-level positions have less impact on corporate bottom lines.

That mid-career—especially in tech-centric specialties—could weigh on unemployment figures. Companies seeking to whittle payroll may pursue leaner staffing protocols, leaving plenty of talent on the sidelines to appease shareholders.

5. Can Crypto Recover?

It is pretty easy to argue that 2023 has to be a better year for crypto than 2022 since it could hardly be worse.

Multiple stablecoins slipped their pegs in 2022—including TerraUSD and Tether, fueling a midyear crypto crash that wiped out hundreds of billions in value. Crypto exchanges, meanwhile, were hobbled by growing pains and layoffs (Coinbase)—not to mention the sudden implosions of FTX.

Moving into 2023, look for cryptocurrency businesses to woo investors with stories of cash reserves instead of trendy coins and celebrity endorsements. And look for big developments in cryptocurrency regulation from Washington, D.C.

The Fed launched its 12-week central bank digital currency (CBDC) proof-of-concept project in mid-November, and legislators remain excited to advance crypto regulation legislation.

Unfortunately, many blockchain conversations will likely be colored by the debacle at FTX instead of the technology’s long-term, untapped potential.

7. New Interest in Renewables

The landmark $1.2 trillion infrastructure bill of 2021 and the Inflation Reduction Act of 2022 make trillions of federal investments available for renewable energy projects.

While supply chain issues stymied clean energy developments from electric vehicles (EVs) to solar panels over the last two years, 2023 could be a very good year for renewables.

With battery storage and EV adoption inextricably intertwined, BDO Global predicts a banner year for renewable energy storage systems. Increased competition in the EV market from newcomers like Rivian, Lucid, Ford and Chevy could put mainstays like Toyota and Tesla on their heels.

And natural gas shortages stemming from European Union conflicts have increased policy momentum for clean and renewable sources.

8. Hybrid Robo-Advisors May Have a Moment

Recent data from Parameter Insights show that investors exited self-directed investment tools like robo-advisors and brokerage accounts at a staggering pace in 2022. Theories on the exodus abound, but two lead the charge: Wealthier investors may be flocking to traditional financial advisors, and DIYers may be content to wait out a market recovery with cash in hand.

No matter the reason, hybrid robo-advisors—those that offer algorithm-driven investing plus access to traditional advisors—may be teed up for a lot of interest in 2023.

With consumers demanding more value for their money during inflationary times, the low-cost/expert advice behind hybrid robos hits the zeitgeist. By offering a combination of services like automatic rebalancing and tax-loss harvesting with financial advisor access, and at a fee typically lower than traditional advisors—

Price-sensitive economies make investors more value-driven than ever, which positions hybrid robos as the best of both worlds for investors eager for guidance but anxious about costs.

9. Estate Planning Enjoys an Upward Trend

Even if the year ends with the death of Twitter at the hands of a petulant billionaire, 2022 was an excellent year for end-of-life preparations. A study from found that the number of Americans undertaking estate planning is rising.

As of 2022, 54% of respondents with postgraduate degrees now have estate plans—a 15% increase over 2021 figures. Moreover, the number of young adults with a will has also increased by 50% compared with pre-pandemic levels.

But with stock market returns lagging and inflation muddying 2023’s outlook, what could inspire investors to continue estate planning’s upward trajectory?

In a time where much seems beyond control, estate planning and the asset protection it can provide is 100% within an investor’s control. Holly Geerdes, an estate planning attorney at the Estate Law Center, says that estate planning isn’t so much about death or assets. Instead, it’s about taking control and having your say on what your wishes, wants and concerns are today to live on in the years ahead.

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How well homes have performed as an investment




Fred Lum/the Globe and Mail

If houses are investments, then they’re subject to the harsh math of investing losses.

However much an asset falls in price, it has to rise by a larger percentage just to get back to the starting point.

The national average resale home price peaked at $816,720 in February and has since fallen a bit more than 21 per cent to $644,463 in October. To get back to the peak, we need the average price to rise by almost 27 per cent. Figure on it taking between four and five years to do that, if prices bounce back enough to revive the toxic idea that houses are investments.

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Treating houses as investments means the death of affordability. The longer prices decline or flatline, the more opportunity there will be for home ownership to remain a viable middle-class goal.

Still, the investment mentality is a big reason why our housing market overheated. Attention must be paid.

What houses have going for them as investments is a decades-long history of price appreciation that beat inflation, and a capital gains tax exemption on the sale of a principal residence. That tax break is a key support for the idea of housing as a financial asset.

There are steep costs if you own a home, including maintenance, improvements and mortgage interest. But never mind that. Houses have clearly been seen as a can’t-miss investment in the past two years. The only way to explain the questionable buying decisions made in 2021 is that people saw houses and condos soaring in value and wanted a piece of the action.

House prices are falling in many cities, which adds some gritty authenticity to the idea of houses as an investment. Stocks are investments and everyone knows they go up and down in value.

Let’s look at how a recovery in house prices might play out. The annualized average price gain from 1980 to 2021 for resale homes was 5.8 per cent, which is an impressive three percentage points above the average inflation rate for that period.

If houses appreciate at an average annual rate of 5.8 per cent for the next 4.5 years or so, the average resale price would exceed the February peak. With a growth rate in prices of 2.9 per cent, it would take about 8.5 years to recover.

You’re in better shape if you bought in 2020 or early 2021, when mortgage rates were cheap and pandemic lockdowns drove people to find homes with more living space. If you bought at the average national resale price in January, 2021, you’re ahead by 3.7 per cent ahead, based on the average resale price for October. A purchase at the average price in October, 2020, leaves you up about 6 per cent.

There’s plenty of investment goodness left in a home bought at the average of $525,000 in October, 2019 – current prices are cumulatively almost 23 per cent higher than that, or 7.1 per cent on a compound average annual basis.

Investment success in housing comes at the expense of affordability for people trying to buy into the market. Expect to see more of this, not less.

Further increases in mortgage rates could hold back a price recovery, but there’s growing evidence that we are close to the end for the current cycle of rate hikes. A recession is possible, but the consensus so far is that it will be a) mild, and b) unlikely to cause rampant unemployment, which is deadly for housing. We still have a very tight job market in some sectors.

A clear advantage for housing is that nearly 1.45 million immigrants are expected to come to Canada in the next three years, a big number for a country with a population of not much more than 38 million. Expect housing supply to increase in the years ahead, and expect it to be soaked up to some extent by newcomers to Canada.

The historical 5.8 per cent growth rate in Canadian house prices was powered by a decades-long trend of falling interest rates. We could see falling rates by late next year. TD Economics sees the Bank of Canada’s overnight rate falling in the fourth quarter of 2023, while the Government of Canada bond yields that influence fixed mortgage rates are expected to fall through the year.

A quick rebound in house prices would end the dream of home ownership for young adults in some big cities. Prices haven’t fallen enough yet to discredit the seemingly unshakable idea of houses as an investment.

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New report shows $200-billion drop in responsible investing market share in Canada



For more than a decade, responsible investing in Canada experienced steady upward growth. A new report says that trend has reversed itself in the last two years, as the industry struggles to respond to allegations of greenwashing and a tougher regulatory environment.  

The value of portfolios classified as responsible investments (RI) dropped from $3.2 trillion on December 31, 2019, to $3 trillion at the end of 2021, according to the 2022 Canadian Responsible Investment Trends Report published last week by the Responsible Investment Association (RIA). 

While a $200-billion drop against $3.2 trillion seems like a modest decline, the fall in RI’s share of total Canadian assets under management (all assets professionally managed for clients) was significant, plunging from 62% of $5.1 trillion in total assets in 2019 to 47% of $6.4 trillion in total assets at the end of 2021. 

RIA CEO Pat Fletcher sees this adjustment as a welcome development. 

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This reclassification reflects an increase in “conscious conservatism” by Canadian asset managers in the absence of industry- or government-regulated definitions, criteria or standards, she says, causing many managers “to err on the side of caution” and strip the “responsible investment” classification from some of their portfolios.  

This reverses a 12-year trend by asset managers (stretching back to the financial crash of 2008) to classify large portions of their assets as “responsible” or “sustainable,” even though there are no widely accepted standards for such a classification. 

“A few years ago, overall [RI] might have been a mile wide and an inch deep,” Fletcher says. “I would say we’re getting to a world where it’s a mile wide and a mile deep.” 

Reclassifying responsible funds

RIA commissioned Environics Research to collect and analyze data for the report, which included responses from 77 asset managers and 13 asset owners. Publicly available data was used for 26 additional organizations that did not complete the survey. 

The growing trend to reclassify RI assets is happening around the world as regulators become more conscious of potential greenwashing and move against asset managers who cannot substantiate their responsible or sustainable investment claims. 

The Canadian Securities Administrators (the umbrella group for Canadian securities commissions) cited greenwashing concerns earlier this year when it released new guidance for investment funds employing ESG strategies. The guidance requires managers to align their fund’s name and investment objectives, disclose investment strategies, and explain how environmental, social and governance factors are evaluated and monitored. 

Canada’s relatively light-touch approach contrasts with much bolder action in the U.S., where the Securities and Exchange Commission (SEC) is cracking down on ESG funds and advisors. On November 22, the SEC announced a fine of $4 million against fund company giant Goldman Sachs Asset Management, saying it had failed to have written ESG policies or to follow them consistently on some of its ESG funds. 

In Europe, regulators have gone even further, establishing the Sustainable Finance Disclosure Regulation, which comes into force on January 1, 2023, requiring funds to categorize themselves as light green (Article 8), dark green (Article 9) or conventional funds (Article 6), based on the degree to which investments support sustainability. In the run-up to the new year, major asset managers in Europe have reclassified dozens of funds worth billions of euros from dark green to light green. Earlier this year, the investment rating service Morningstar reclassified more than 1,200 European-based ESG funds with more than US$1 trillion in assets, saying they don’t integrate ESG factors in a “determinative” way. 

Managers pull back on ESG integration 

Canada’s RIA, the umbrella organization for the responsible investment industry, has established seven RI strategies, which are widely recognized by the industry around the world: negative/exclusionary screening, positive screening, norms-based screening, thematic (ESG) investments, corporate engagement and shareholder action, ESG integration, and impact investing. 

RIA surveyed member and non-member asset managers and found that the most common strategy being used is ESG integration (the inclusion of ESG factors in stock analysis), used by 94% of respondents to the report. Negative screening (for instance, screening out weapons, tobacco or fossil fuels) is number two at 91%, and corporate engagement is third at 79%. 

The report says some managers, including several large firms, tightened the value of assets under the ESG integration strategy in 2021. These managers may no longer consider ESG integration as a stand-alone RI strategy, the report says, “as ESG integration has become business as usual.”  

RI industry veteran Stephen Whipp, a long-time financial advisor from Victoria, B.C., welcomed this reclassification, saying it will help bring an end to industry greenwashing. 

“We’re going to see a lot more caution about how these funds get described in the marketing materials,” he says. “If you’ve read some of the marketing material, you would think that investing this way is going to change the world forever.” 

More to be done on responsible investing

Corporate engagement through shareholder advocacy is one of the areas where investment managers are vulnerable to greenwashing accusations, says Matt Price, director of corporate engagement at Investors for Paris Compliance. He says fund managers making claims to address environmental and social issues through corporate letters and meetings need to prove the effectiveness of their actions or stop making the claims.  

“There has to be more accountability, more disclosure about what happens with engagements, and turning engagement into escalation with clear metrics and timelines for a company to change,” he says in an email. “Otherwise, it’s just more tea and biscuits.”  

The movement to reclassify ESG assets will also likely encourage the use of impact investing (investing intentionally to create measurable social and environmental change), suggests Roger Beauchemin, CEO of Addenda Capital, one of Canada’s largest asset managers, with more than $35 billion in assets.  

“We’re going to start seeing some really interesting things in terms of impact, all these projects that affect the real economy, the real society,” said Beauchemin, who also chairs the RIA board of directors, at a webcast launching the trends report. “I think that’s the next frontier.” 

Whipp says he is cautiously hopeful for the future. 

“I welcome any movement by the [responsible investing] industry towards setting some standards so that if you are claiming to be an [ESG] kind of fund, you have to have backup to support that.”  

Eugene Ellmen is a former executive director of the Canadian Social Investment Organization (now Responsible Investment Association). He writes on sustainable business and finance. 

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