Hope you had a good weekend and are finding your quarantine rhythm in these crazy times!
I have genuinely enjoyed some things that have developed as a result of this pandemic, chief amongst them is the fact that I am now in control of my own schedule. The only trouble with that is now I don’t have any excuses in terms of what I am accomplishing with my time! On a global basis, I am inspired by the fact that Lady Gaga has raised $35 million for COVID relief with her virtual concert, and the different ways people are finding to support front line workers across the globe. I am also cringing at the Gal Gadot led celebrity sing along of “Imagine” and the myriad of TikTok videos that seem to be popping up every time I open Instagram. The world has thrown us off balance and lots of people haven’t found their feet yet, some have completely fallen down, while others are finding a way to thrive. I am still trying to find my own balance in these uneven times and the speed at which the world at large is capable of adapting is really going to be a primary driver in how well and how quickly we get through this crisis!
Markets are currently in a holding pattern right now. I can’t tell you how many hours I am wasting reading economic reports. I say “wasting’ in that since nothing about what is currently happening economically has any real precedence, no one can speak to the immediate future with any sort of credibility or conviction. We have had a massive exogenous shock to what was otherwise a pretty healthy economy. We still don’t even know the full damage of the virus yet, although news continues to be positive that we are making progress in flattening out the curve. The financial fallout from an imposed economic shutdown is going to be massive, but policymakers are throwing everything that they can at the economy to try and blunt the fallout of COVID-19. Trillions more dollars were pledged this week into relief efforts as the next tranche to try and soften the financial impact of the crisis. Markets are bracing for what is certainly going to be the worst quarter we have ever experienced from a productivity standpoint. Policy makers are trying to find solutions, but how do you fix a market that had no imbalances or excesses but was voluntarily shut down? The answer right now seems to be to just throw money at it. To quote outgoing Bank of Canada Governor Stephen Poloz, “A firefighter has never been criticized for using too much water.” Right now, countries are globally in the process of trying to hose everything down. Investors are skeptical, and with people wary and markets pessimistic, signs are pointing to more pullback and consolidation. The weird thing about that is when we get to a point where there are more investors “bearish” about the near term outlook than there are “bullish”, it tends to be a contrarian sign that things are actually about to look up. Lots of FOMO (fear of missing out) mentality out there as investors who didn’t manage to put money to work at the height of the crisis wait for further market weakness as a chance to try and buy in. I hope you can see why the short-term prognosis is so murky!
My wife is an elementary school teacher and as the kids return to a quarantined version of school, there is a real struggle to adapt to online learning. We know that school will eventually go back to normal classrooms, but the interim virtual version is one that is going to take some trial and error to figure out. One of the first things Kristy had the kids do is send in a journal entry of something creative they did in the week. Some families had amazing entries – kids building elaborate forts, learning a new instrument, crocheting something for the first time. Other entries included “I grew this tulip”, and “I made snowman pancakes” (and by “made”, what the boy actually meant is “decorated” by popping a couple of chocolate chips onto pancakes his mom cooked!). We tried to use this to shame our own kids into a more productive use of their time. So far, my daughter has managed to watch all 10 seasons of “Friends”, my youngest son is well on his way to professional gamer status, and my oldest son’s claim to fame is the scraggliest looking beard I have ever seen – all of them are in the “needs improvement” category of students! We know that schools are going to eventually return to normal, but kids and teachers must find a way to make things work and adapt as best as possible in the meantime. What subjects are most important? How can they be taught and evaluated? How are the more vulnerable students going to be supported? And, of course, the biggest question being how long until things return to normal? All are questions that are going to take some time to figure out. Some kids are going to find a way to thrive in this new environment, while others are going to struggle, and some won’t be able to adapt at all.
Same scenario going on with our economy right now. We have plenty of historical precedent to know that markets will recover and we know the stimulus will accelerate that recovery, but that doesn’t really help us in terms of guesses as to how long that is going to take or what casualties will arise. Nor do we have any sort of historical context that helps us understand how to safely reopen an economy that was artificially shut down in the midst of a pandemic. As such, markets will continue to be moved in the short term by the somewhat unquantifiable criteria of how well we flattened out the Covid-19 curve and how the reopening of the economy goes.
The good news continues to be that while we don’t know exactly what path the road will take, nor how long it is, we do know the road eventually takes us back to a place of economic recovery. We also know that being a good long-term investor means having the capacity to look through short term headlines. If we know that COVID-19 is not going to be headline news in 2022, then we also know that pandemic inspired discounts on stocks in 2020 represent opportunity. The trajectory of the recovery is immaterial for the patient investor. Stay disciplined, keep your longer-term lens on as you look at markets, and try and be adaptable enough to find your balance in all this uncertainty!
The information provided here is general in nature and should not be considered personal investment advice or solicitation to buy or sell any securities. It may include information concerning financial markets as at particular point in time and is subject to change without notice. Every effort has been made to compile it from reliable sources, however, no warranty can be made as to its accuracy or completeness. The views expressed here are those of the authors and writers only and not necessarily those of Worldsource Securities Inc., its employees or affiliates. There may also be projections or other “forward-looking statements.” There is significant risk that forward looking statements will not prove to be accurate and actual results, performance or achievements could differ materially from any future results, performance or achievements that may be expressed or implied by such forward-looking statements and you will not unduly rely on such forward-looking statements. Before acting on any of the information provided, please contact your advisor for individual financial advice based on your personal circumstances.
Worldsource Securities Inc., is the sponsoring investment dealer and the member of Investment Industry Regulatory Organization of Canada and the Canadian Investor Protection Fund.
leave a comment