First and foremost, we remain focused on the well-being of our clients, family, and friends during this difficult and unusual period. We also continue to monitor developments with respect to the spread of the coronavirus, government responses, and implications for our clients' investment portfolios. There have been some significant changes over the past week and we summarize our key thoughts below, along with links to new podcasts and interesting articles.
The coronavirus continues to spread. While Europe continues to grapple with a growing number of cases, the U.S. is seeing its case load rise faster, particularly in certain jurisdictions like the state of New York. It has now surpassed China in terms of largest confirmed case count. Governments around the globe have escalated their containment efforts over the past week and it will take at least a few weeks, if not longer, to gauge whether these actions are effective. Meanwhile, measures out of Italy, which has been on lockdown for about two weeks, have yet to offer conclusive signs that infection rates in that country are starting to slow.
Governments have stepped up their efforts considerably over the past week in order to help offset the hit to their economies. More specifically, many governments around the world have announced significant measures aimed at helping the unemployed, as well as businesses, deal with a period of cash flow shortfalls. Meanwhile, central banks have leaned on lower interest rates but more importantly have adopted policies to ensure strong liquidity and proper access to credit for businesses, large and small.
Investors will need to prepare themselves for economic data that will deteriorate markedly in the weeks and months to come. Indeed, this has already started to happen. In Canada, for instance, unemployment insurance claims have already risen to nearly one million over the past week, representing nearly 5% of all employees in the country. Meanwhile, in the U.S., jobless claims rose to 3.28 million this past week, a significant jump from the 281,000 claims filed the week before. Interestingly, the equity markets responded well to this seemingly bad news, as they had already fallen meaningfully in the weeks leading up to these data releases, reflecting the increasing odds and anticipation of an economic recession.
The important question remains whether the measures that have been taken – and may yet be taken – by governments and central banks are meaningful enough to limit the economic hit to a period of months and a mild recession versus something that is deeper and longer.
We have posted a podcast series on our website. The 10-Minute Take podcast series provides insights from RBC Economists and market experts on events unfolding around the globe. This page will be updated as new and relevant podcast become available.
Use this link to listen online.
A deeper recession but… the recovery could be quicker and stronger
RBC Global Asset Management Inc. Chief Economist Eric Lascelles, now believes a deep (yet potentially brief) recession will occur in the U.S., Canada, and Europe as day-to-day life has nearly come to a standstill. Because the coronavirus shock is such a unique event, we believe the contours of the recession and recovery could be unique as well.
Audio commentary: Coronavirus, the oil shock, and market impact
In this audio commentary, Mark Bayko, Head of the Portfolio Advisory Group, and Patrick McAllister, Canadian Portfolio Advisor, discuss how the coronavirus outbreak and oil price shock are impacting the Canadian economy and stock market, what they’re observing from the fast-moving developments, and what to expect from here.
Listen here (approximately 14-minute duration)
We are seeing some amazing things in our community, as people band together to support one-another during this time of physical distancing. We’ve seen local restaurants and businesses get creative in how they connect with clients, including curb-side pick-up and delivery services. Messages of positivity are being shared in chalk on driveways, and community support for front-line workers and the organizations that support them is inspiring.
People are also still connecting, albeit at a distance. Although we are practicing physical distancing, it is important to remain connected with family, friends, and colleagues. There are so many tools that can be used – Many of our team members are working remotely, but we are staying connected with each other through email, over the phone, and video chats.
Investing in a falling market
We continue to expect volatility to remain elevated in the near term until clarity emerges on the potential containment of the coronavirus. Nevertheless, we remain disciplined in our long-term investment approach and continue to have confidence in your portfolio.
We shared an article from the New York Times last week about market volatility and, although we’ve seen some positive movements on this market this week, we wanted to share another article from the Times about investing in a falling market: How to Stop Worrying and Love a Falling Stock Market.
It is in times of market volatility that we often find the best opportunities to buy high-quality dividend stocks. As famed investor Warren Buffet once said: “Uncertainty actually is the friend of the buyer of long-term values.” Please let us know if you’d like to take further advantage of this potential opportunity.
Did you know:
Canada Post is offering a free Hold Mail service due to the COVID-19 pandemic. Visit the Canada Post website for details.
You can view your statements and send secure 2-way messages to us through DS Online. If you haven’t signed up for DS online, call our office at 519-822-2024 and we can help you. You can also register yourself through our website. Find out more on our DS online webpage.
The way that people are working has changed. If you’re working from home like some of us are, there are some great advice articles on how to stay productive. This article was published recently in Guelph Today: Expert tips for working from home in a crowded house during the coronavirus pandemic.
As always, we will remain vigilant and are available to answer any questions that you may have. You can call or email us at 519-822-2024 or firstname.lastname@example.org.
Jay Elinesky, B.B.A., FMA, CIM
Vice-President, Portfolio Manager
Tom Schuett, B.Comm, MBA, CIM
Vice-President, Portfolio Manager
Karie Huisman, PFP
Associate Investment Advisor
Jennifer Goody-Brown, B.Comm, PFP
Associate Investment Advisor