Weekly comment - May 15, 2020

May 15, 2020 | Nick Foglietta


My goal would be to maintain a hybrid of both office and working from home going forward.

Working from Home

A few of you have asked what it has been like to work from home the past few months. There are a couple of things worth sharing.

Let’s call them, The Good, the Bad, and the Ugly.

The “good” really does dominate my feelings about working from home (WFH). About 80% of WFH is an easy fit with my typical day and lifestyle.

When I work from the office my usual schedule is to get to the office around 6:00 a.m., work until 7:45 am. Go to the gym for an hour; grab coffee number two for the day and be back at the office for 9:00 a.m. Work until 11:30 a.m. then walk across the street for take-out lunch from Quality Foods and return to my desk to finish my day…usually around 1:30 p.m.

When I work from home, I usually start around 5:30 a.m., and work until my wife and I go for a walk around 8:00 a.m. Back 45 minutes later for a shower and work until 1:00 p.m. (with multiple meals squeezed in there for good measure). When the stock markets close at 1:00 p.m., I take a two hour break and do a workout/hike/bike ride (or multiple of those activities) until around 3:00 p.m. Then I work for another hour to wrap my day.

Honestly, I think I am more efficient and have better time coverage for clients on my WFH schedule than my office schedule. There are also way less distractions through the day.

The “bad” is not having a great phone system. Right now I am on call forward from the office. It is just not an ideal way to balance incoming calls and the phone reception can be a little sketchy.

Also, another “bad” is not seeing my colleagues. In one sense, this is why it feels more efficient, but I really do miss them and our impromptu conversations that take place through the day.

Finally, the “ugly.” This one might surprise you, but it is actually missing all of you. The main thing the past 11 weeks of working from home has magnified in my mind is that two things keep me working:

  1. My fascination with how financial markets function, and
  2. The pleasure I get out of meeting with clients, hearing their concerns and dreams, and helping them find a way to achieve them.

The truth is, my fascination with financial markets would not end if I retired. I could keep engaged in that part of my life no matter what I was doing if I wished.

So clearly, the social interaction with clients is what I would miss most.

Slowly, things are getting more normalized, and while not in big rush, RBC is looking at ways to get us back to our offices while maintaining recommended guidelines.

My goal would be to maintain a hybrid of both office and working from home going forward. We will see what the future brings.

Algos Gone Wild

The talk of zero and even negative interest rates in the US is growing.

There are a few important repercussions I see from negative interest rates for investors.

  1. Banks are not going to like negative interest rates – Banks have performed badly in any country or region that has employed negative interest rate policy (NIRP). The “spread” is crushed and financial markets lose their growth. Both of these affects are kryptonite for bank profits.
  2. Stock markets are going to be confused – On one hand, the weak economic data will scare stock markets causing downside volatility in price. But the computer algorithms (algos) that value stocks vs. bonds etc. will think “stocks are cheap” when interest rates keep going down, so it will likely cause upside volatility in the stock markets. 
  3. Negative interest rates will not likely flow back to mortgage borrowing – it would not surprise me to see a more tiered sense of borrowing where “weaker” borrowers start paying higher spreads over “strong” borrowers.
  4. Economic growth rates will further stagnate – negative interest rates will not help the economy recover. They will further “zombify” (to coin a word) the economy…period.

Get ready for many more days of head-scratching behaviour in the financial markets. They are coming…

US Stock Market Valuation

Price is what you pay, value is what you get.”

An old expression, but very true words.


The chart above is really a perfect depiction of what has happened in the last three months.

In February 2020, stock market price-to-earnings (P/E) multiples were near the highest in history. March saw the stock market price collapse by 30+% bringing the P/E down sharply.

Then two things happened in April:

  1. Stock prices recovered, and
  2. Earnings collapsed.

These two events caused the huge spike back up in the P/E ratio in the chart.

I hope this helps you understand what is happening in terms of valuation of stocks at present.

To finish, a little smile for those working at home (with or without a furry friend)...

Keep safe, keep well and enjoy the long weekend.


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