A few topics our newsletter touches on this week:
- Government Stimulus Announcements & Market Uptick
- RRIF minimum reduction announcement
- Correction & Recovery (Market Analysis)
- New RBC podcast series
Governments step forward with money for families and businesses:
There has been a marked increase in optimism in the market the last few days, as both Canada and the US unveiled historic stimulus packages ($107 billion and $2 trillion respectively). We saw both the TSX and Dow Jones string together the first consecutive positive days since February. While certainly good news, this does not mean that volatility is behind us, it does however help to stabilize economic anxiety and will help businesses to more quickly recover when the time comes.
Reduction in RIF Minimums for clients who wish to defer paying taxes
The ink is not quite dry on that very large stimulus package from the federal government. Details on how all of the Trudeau government’s announcement will work are still being hammered out – some of our clients we know have particular interest in the proposed reduction of the RIF minimum withdrawal amounts by 25% (announced last week). For those clients who may not need their full RIF minimum amount for 2020, please let us know if you would be interested in learning more or discussing further once we have that information.
Correction and Recovery
We have been through many similar moments of market uncertainty and, in our role as stewards of your capital, are focused on ensuring you are in the best possible position to take advantage of the eventual recovery. Eric Lascelles, Chief Economist for RBC GAM, projects that the nature of this slow down (work/stay at home) can be rapidly reversed when virus wanes, with their tentative 2021 GDP forecast assuming a quite impressive rebound. A good thing to do in times like these is to review the underlying names you hold in your portfolio as a reminder of the good, solid businesses that you are invested in.
We thought we would share the table below which highlights the “year after” return following major declines in the S&P 500 (US stock index).
Staying the Course
Of course, we are not through this yet.
Volatile market environments can prompt investors to want to reduce equity until the dust settles, history has shown time and time again that while being in cash in the days leading to a secular bottom may feel good in the moment, it often leads to missing out on the beginning of the recovery, which can have significant negative impact on long-term returns.
As the chart below shows, missing out on just the 10 best days over the 8,400 trading days spanning the last three decades reduces annualized returns by roughly 2 percentage points. In other words, $100,000 invested 30 years ago would be worth 40% less now strictly if those top 10 days were missed.
New RBC Podcast Series – The 10 Minute Take
New episodes will get posted regularly to discuss various issues front and center during the COVID-19 crisis. The latest episode discusses the US dollar sliding this week after an extraordinary run-up in March, and features commentary from George Davis, RBC Capital Markets’ currency strategist.
Our team is here for you
We continue to recommend in these types of environments the strategies of high-grading the names in your portfolio and re-balancing if appropriate. Our team is now all working from home, but remains available to you by phone, e-mail or video conference as necessary. Our office remains open if a need should occur. Please do not hesitate to reach out if you have questions or want to discuss your portfolio.