Happy Easter! Hope everyone is healthy and finding ways to live and thrive in a Covid-19 dominated world. Hard to believe how much things have changed in a month and the paradigm shift is jarring. We’ve gone from a world constantly on the move, globally connected and busier & more crowded than it has ever been, to one of social distancing, quarantine and isolation. Healthy economy and robust stock market, to one of the fastest descents to bear market and recession ever on record. Yet despite the discomfit and stress that comes from living in uncertain times, there seems to be more unity, more sense of us all being in it together that I find encouraging. We are being forced to put “normal” on hold and alter our perspective on some things that we maybe used to take for granted. Grocery shopping ranks right up there with getting a tooth drilled in terms of things I like to do. But with markets closed on Friday, it left me no where to hide when my wife decided we needed to hit Costco. My worst fears were confirmed when we pulled up to the store and saw the Disney like line up snaking through half the parking lot. But the sun was shining, we had stopped off at Tim Hortons for iced coffees, we had nowhere else we needed to be, and everyone in line was relaxed and in a good mood. We even managed to catch up with some friends as we periodically passed each other in the queue. The ninety minutes it took to get into the store felt like a date out with my wife (which may be a reflection that I need to up my game in that department a bit!) and passed quickly. The actual in store shopping part was easy – no crowds, no lineups, and Costco hasn’t raised their prices. Pretty sure we got two buggies full of food for the same price as a basket of goods at our local grocer and who knew finding toilet paper could be so exciting! I ended up really enjoying the outing. Different world, certainly not better, but not all bad either!
Market wise last week was one of the best weeks we have had on record in over 50 years with them rising about 12%. Important to remember that markets are vainly reaching to try and quantify the unknown. I am spending hours daily looking at markets, reading economists and analysts forecasts, reviewing ever-changing economic modeling programs and yet my best source of data is my wife. Kristy is an elementary school music teacher with no interest in stocks beyond what impact they have on my life. She has a Covid-19 tracker app on her phone that monitors the world outbreak numbers. Every night she spends 5 minutes looking at the numbers and listening to Bonnie Henry. From that she tells me either – “things are looking good for you tomorrow”, or “you’re screwed”. I am not joking when I tell you she has a much better track record of being right than most of the economists I am reading!
Financial numbers are going to be irrelevant until the virus spread is flattened. Last week was good because outbreak numbers look like they are hitting a peak. The pace of spread of the coronavirus is slowing globally with the rate of new infections starting to flatten out in the earliest hit regions, as the aggressive self-isolation/social distancing measures start to bear fruit. More testing is becoming available, 70 vaccines are now in trial stages and the first affected countries are reopening businesses and reintroducing “normal”. South Korea is even playing baseball again! Market volatility, while still elevated, has come down from its lofty levels as the daily swings become relatively more modest. Really important to remember here is that it is still too early to call this a global tipping point and that there are lots of dangers and unknowns to navigate – chief among them is the risk of a secondary outbreak or reinfection before a vaccine is developed. Once we know the scope of the pandemic the economic numbers will once again come to the forefront as we get a sense of both the damage done to the economy and will begin to see the effects of the massive fiscal and monetary stimulus packages. Still lots of volatility ahead.
We don’t know the when, but we do know that eventually productivity growth and technological advancements will ensure that the economy will once again grow, as will the earnings, profitability and cash flows of the great businesses we own. Markets aren’t as cheap price wise as they were two weeks ago, but there is still value out there and when we are long term investors, value is exactly what we want. “ Price is what you pay, value is what you get” to paraphrase Warren Buffet. If we want our investments to do well over the next ten years, it is value that we are worried about, not price. Stay disciplined and remember your long term objectives so that you don’t make an emotional decision based on a shortsighted, myopic view of current events. Be prepared for more volatility and gather what cash you can to try and be ready for new opportunities that may arise from such a crazy market.
Stay safe, try and find the good in challenging times!
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