The unprecedented volatility on the stock market continued on Friday as the benchmark index of the Toronto Stock Exchange started off strong before giving up most of its gains by midday.
Thursday was the worst day for the TSX in decades, as the benchmark index lost 12 per cent of its value. Fears of the coronavirus prompted the sell-off, but on Friday buyers seemed to be thinking the market may have overreacted.
Prior to the market opening, the futures market was so strong that the market was temporarily shut down to restore order.
When that shutdown was lifted, the TSX in Canada, and the S&P 500, the Dow Jones and the Nasdaq in the U.S. were all up by between five and six per cent.
But by midday, all those markets had given up most of those gains and they were all up by a little over one per cent.
Investors can’t seem to shake the fear and uncertainty over what the coronavirus that causes COVID-19 will do to the North American economy, as the number of cases escalates rapidly.
The Canadian government recommended that citizens cancel all non-essential travel outside of the country on Friday. At 2 p.m., Finance Minister Bill Morneau is expected to make a significant announcement about stabilizing the economy in the face of the virus.
Finance Minister Bill Morneau is set to speak to reporters at 2 pm. It’s anticipated he will make a significant announcement to help stabilize the economy during the covid-19 outbreak.
—@CochraneCBC
The stock market gains — even modest ones — were a relief to investors who have seen several years worth of returns on the TSX wiped out in a matter of days.
At its closing price of 12,508 on Thursday, the TSX was at the same place it was at back in 2016. In fact, going back even further, the TSX is currently at the same level it was in late 2006 — meaning if you don’t count dividends, in this sell off more than 14 years’ worth of capital gains have been wiped out.
Investment portfolios have been hit by a blow that’s almost as severe. It was been an eye-watering week for investors who have taken the conventional wisdom of financial advisors — buy stocks and hold them for the long haul.
“Recall that the index was at an all-time high as recently as three weeks ago to the day,” BMO economist Doug Porter said. “Markets have already built in a very severe blow to the economy.”
