Kingsmill's Investment Miscellanea: Friday, March 6, 2020

Mar 06, 2020 | Joshua Kingsmill


Key Takeaways:

  • Global response to react to the Coronavirus has commenced
  • The lower interest rates should mean higher housing prices in North America in the short term
  • This presents opportunities to make changes to investment holdings tactically

Last week, we talked about the concerted global response to the Coronavirus that would occur (“link to last week’s article”), and indeed the rate cut in Canada of 50 basis points on Wednesday as part of this response. While the number of Coronavirus cases is declining in China on the back of tight restrictions and more companies have noted normalizing economic activity, more and more cases have reported around the globe.

Growth Rate of COVID-19

One of the consequences domestically of the rate cut, coupled with the changes to the mortgage stress test that were announced in February, is that it’s likely we will see more upward pressure on house prices. In addition to this recent measure, the Bank of Canada sent a strong message that they are willing to reduce the rate even further this year. It is interesting times with rates so low, and for so long: I often wonder what the long term impact will be given all of this low debt that is available as a result of these low rates.

On the stock market side: following the gyrations from an all-time high less than three weeks ago to the daily massive ups and downs has been a challenge. It’s been akin to being a sports broadcaster: “The black team is up huge right now.  Nope, now the Red team has pushed things down.  And another rally from the Blacks.  And now the Reds push back” I have made some tactical changes in clients’ portfolios: switching out of some sectors and into things that are better positioned. I have been busy having conversations about what to keep, what to switch, and what to buy with your cash on hand.  And I will continue to reach out and talk to all of you.  

So when clients ask me what I should do: ultimately, no one knows how long the Coronavirus will last. One's long term goals don’t change simply because the market goes down, however. There are tactical changes that we will continue to make and react as it unfolds; eventually, the virus will be contained.

Never one to rest on my laurels after predicting Biden’s victory in last weekend’s primaries: I am predicting that many will forget to change their clocks for Daylight Savings time. I also further predict that we are near the end of the twice-annual changing of the clocks, and future generations will wonder why we did such a silly thing. The Northerners from the Yukon have already figured this out, and won’t ever “Fall Back.”