RBC Wealth Management’s latest thoughts on the unfolding coronavirus outbreak and the investment implications.

As the COVID-19 situation continually evolves, this is a period of great uncertainty for all of us.

To help make sense of these difficult times, we wanted to share a conversation with Jim Allworth, RBC Dominion Securities’ Investment Strategist, from March 18th, 2020 on the economic impact of the outbreak and what this disruption means for financial markets, what we’re observing during these fast-moving developments, and what to expect from here.

Jim has a world of experience though market cycles with over 40 years at RBC. Please take a few moments to listen to this audio file.

Some key thoughts from the talk that we feel are pertinent with regard to your portfolios:

• Investor sentiment is not a great barometer for the fundamentals of the market, in general, but it can be in extremes (eg extreme pessimism) where more often it is an inverse indicator of future performance
• The market was reasonably fully valued coming into this year, but not overly, with earning projections tied to conservative growth estimates and economic outlook.
• Pandemics in the past, of which there have been many, generally do not have lingering effects on the economy 6-12 months down the road.
• When you buy businesses you are not buying today’s earnings but rather a long-term stream of earnings into the future, for which a 1 year ‘blip’ has only a short-term impact.
• Jim also discusses;
  • RBC’s recession watch framework, its role, and its effectiveness in anticipating this kind of event.
  • The oil shock, and Saudi Arabia & Russia’s goal with pushing down the price of oil.
  • The most important factors that Canada will reckon with in even a short-term recession, such as household debt
• He closes with stating that toughing it out is part of the game, and quotes Jim Cramer “Nobody ever makes a dollar by panicking”

The whole team is available if you want to discuss our current strategies and how they may fit with your portfolio.

Stay well and reach out to us if you have any questions.