At the time of writing, Canada has recorded more than 24,000 confirmed cases of coronavirus (COVID-19), resulting in 717 deaths. In addition to placing an immense strain on medical workers and services, the COVID-19 public health emergency is also wreaking havoc upon the global economy. Given the unprecedented nature of today’s economic conditions, novice and veteran investors alike are understandably anxious about keeping their assets in the market.
However, coronavirus investing advice, portfolio outlooks, and risk management strategies will only get you so far. If you want to avoid unexpected surprises, you still need to be gauging investor sentiment, analyzing market conditions, and reviewing performance metrics.
How Bad Are the Financial Impacts?
In short, it’s bad. Quite bad. Despite a remarkably bullish rally, Canada’s major equities index, the S&P/TSX Composite Index, is still down 13.28 percent year-to-year. Although industrial output is finally beginning to ramp up in China, international supply chain issues continue to persist. In commodities, hydrocarbon markets are only just recovering from a destabilizing OPEC+ supply dispute between Russia and Saudi Arabia.
Employment reports paint a similarly grim economic picture. In Canada, job data from March indicates that more than 1 million individuals have lost their main source of income. The job picture in the U.S. is even worse. In less than a month, more than 10% of the American workforce, an estimated 16 million people, have entered functional unemployment.
What’s Ahead for Global Markets?
The future trajectory for global equity markets is almost entirely dependent on the success of the international community in curtailing the spread of COVID-19. To reduce COVID-19 transmission rates and alleviate pressure on overburdened public health infrastructure, the Canadian government has implemented a slew of strict social distancing measures. In terms of slowing the spread of COVID-19 across Canada, the most effective of these measures has been the mass closure of schools, entertainment venues, and non-essential businesses.
While undoubtedly necessary, it’s important to remember that social distancing measures have their own negative effects, causing massive job losses and grinding global economic activity to a halt. Until a COVID-19 vaccine is discovered, the contagion will continue to have a pronounced impact on the entire global economy, disrupting supply chains, quashing investor sentiment, and amplifying market-to-market volatility.
Unless there is a dramatic change in the spread or virality of COVID-19, global markets are expected to continue trading sideways as investor sentiment seesaws between bullish and bearish factions.
When Is the Market Due to Recover?
Many of Canada’s top industry leaders and financiers view the ongoing COVID-19 downturn as the most severe economic crisis since the Great Depression. Dave McKay, Chief Executive at the Royal Bank of Canada (RBC), has joined other industry leaders in voicing his doubts at the prospect of a rapid market rebound. According to Mr. McKay, the domestic financial impacts of COVID-19 are already significantly worse than what Canada experienced during the global financial crisis.
After chairing the RBC’s annual shareholder meeting, Mr. McKay discussed his views on the financial impacts of COVID-19 in a scheduled Nasdaq media call. “This is much more severe than the financial crisis,” Mr. McKay emphasized. “We’re facing an economic shock and contagion like we’ve never seen…Most people were talking about a sharp V [-shaped recovery] or a U at a minimum, with a sharp upside. I don’t think we can expect that.”
Unfortunately, there’s a lot of truth to Mr. McKay’s remarks about the impediments to a V-shaped recovery, a market pattern that occurs when a steep downturn is equalized by a surging upswing. These factors include tepid consumer spending, over-leveraged corporate debt loads, volatile energy markets, and the near-total collapse in small and medium-sized business activity.
Nevertheless, it’s not all bad news. At this point in time, there are two major factors that are still capable of kick-starting a partial market recovery.
Firstly, the international outlook regarding COVID-19 is beginning to improve. While still a dire public health emergency, the rate of new COVID-19 cases around the world is beginning to slow, falling from 100,000 new cases per day to between 73,000 and 85,000 per day. In New York, perhaps one of the worst affected cities outside of Wuhan, the hospitalization rate has fallen for the first time.
Make no mistake, it will take some time for life to return to some semblance of normalcy. However, an inflection in the COVID-19 viral curve is a very encouraging sign, showing that public health responses are working, and that, given time, the safe resumption of basic economic activity may not be far off.
Secondly, governments around the world are using extraordinary levels of fiscal and monetary stimulus to shore up reeling economies. In Canada, the Trudeau government has already passed a stimulus and economic relief package worth CA$107 billion. Meanwhile, in the U.S., the Federal Reserve has announced that it’s willing to purchase an unlimited amount of Treasury Bonds to ensure credit markets are operating with enough liquidity. On March 26, the G20 announced that it would be collectively injecting more than $5 trillion into the global economy.
The international community’s near-universal commitment to these unprecedented measures shows that governments around the world (and their central banks) are willing to do whatever it takes to patch up the coronavirus-shaped cracks in the global economy.
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets climbed to their best week of the year.
“It’s been almost a complete opposite or retracement of what we saw last week,” said Philip Petursson, chief investment strategist at IG Wealth Management.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
While last week saw a “healthy” pullback on weaker economic data, this week investors appeared to be buying the dip and hoping the central bank “comes to the rescue,” said Petursson.
Next week, the U.S. Federal Reserve is widely expected to cut its key interest rate for the first time in several years after it significantly hiked it to fight inflation.
But the magnitude of that first cut has been the subject of debate, and the market appears split on whether the cut will be a quarter of a percentage point or a larger half-point reduction.
Petursson thinks it’s clear the smaller cut is coming. Economic data recently hasn’t been great, but it hasn’t been that bad either, he said — and inflation may have come down significantly, but it’s not defeated just yet.
“I think they’re going to be very steady,” he said, with one small cut at each of their three decisions scheduled for the rest of 2024, and more into 2025.
“I don’t think there’s a sense of urgency on the part of the Fed that they have to do something immediately.
A larger cut could also send the wrong message to the markets, added Petursson: that the Fed made a mistake in waiting this long to cut, or that it’s seeing concerning signs in the economy.
It would also be “counter to what they’ve signaled,” he said.
More important than the cut — other than the new tone it sets — will be what Fed chair Jerome Powell has to say, according to Petursson.
“That’s going to be more important than the size of the cut itself,” he said.
In Canada, where the central bank has already cut three times, Petursson expects two more before the year is through.
“Here, the labour situation is worse than what we see in the United States,” he said.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published Sept. 13, 2024.
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.
