BY DREW FINERTY
I certainly hope this finds you all well and staying safe as the Coronavirus continues to spread and unsettle global markets, pushing governments and health organizations to take extra-ordinary steps to protect us all. Myself and Dustin did take a hit last week after spending time with some cold-ridden grandchildren, but as of today, I am feeling much better and recovering now. I am planning to self-isolate myself and continue to wash my hands 20-30 times a day for the rest of the week and encourage everyone I speak with to do the same. I am optimistic that taking personal measures, along with the extra care the health officials are recommending, will curtail the spread and hopefully slow it down until they can find a solution. To do our part, we have closed our offices and we will all be working from home for the remainder of the month of March, and then we will re-visit the situation after that. We are still available by email, text, phone and if required, FaceTime.
What about my Investments? (Yes, I am a client too!) I want to reassure you all (again and again) that your portfolios are very conservatively built and not ALL your money is invested in the Stock Markets. As a reminder, most of you have a lot of the Balanced 60% (stocks) 40% (Bonds) as your prime holding for your hard-earned savings. You may have heard both the Canadian and American Governments have slashed interest rates another 1% recently, after dropping them .5% only a few weeks earlier…and you will remember me telling you that when interest rates drop, the value (price) of Bonds appreciate…so this is a very good defensive position inside everyone’s portfolio. To further highlight this balanced portfolio….please have a look at the attachment (both pages) showing how a Balanced 60/40 portfolio has performed since 1987 and through the world’s most volatile periods. From January 1/87 through December 31/19, a Balanced 60/40 portfolio has returned an average of 8% during all the good and bad times. You will also re-affirm the bounce-back from the harshest drops in the markets of 2002 (Tech Bubble) and 2008 (Credit Crisis/Sub-Prime Mortgage Crisis)….and this “Health Crisis” too, will pass in time.
Lastly…the Canadian and American Governments have taken major steps to cushion the economics of the reality. Of course, there is only so much they can do, but they are being pro-active in my mind by triggering a few helpful strategies that will soften the burden for their economies and their citizens:
Lowering Interest Rates ~ dropping Overnight Bank Rates 1.5% in the past two weeks, to a low of .75% in Canada and .25% in the States…the hope is this will inspire corporations and people to borrow money and invest in the economy. Yes, saving money in a bank account will pay very little, but it should spur on some economic activity (hopefully).
Quantitative Easing (QE) ~ you may have never heard of this strategy and it has only happened in the States, but what it does is add “liquidity” to the financial markets by the Government buying Bonds and Mortgage Backed Securities that pumps credit into the economy.
The Canadian Government has created a $10 Billion fund to add support to Canadian Banks, Corporations and the consumer by way of available cash during hard times. It hasn’t happened yet, but I expect we will start to hear at some point Banks making concessions for Mortgage and Loan payments to ease the burden for their customers. They have also made efforts to enhance the Employment Benefits for people losing their jobs or incomes.
At some point, I would expect some kind of Corporate and Personal Tax breaks in both countries to support the economy.
Our Fund Company Partners have been extremely supportive in their daily communications with us to ensure they are doing everything in their power to protect our Client’s assets and make their offices safe and available to us at all times. This is very reassuring as they are the real pros and have a much better knowledge and understanding of the global markets, than the talking-heads in the media. They are always ready to answer any concerns we have at CSF…that gives us a great deal of comfort knowing we are in this together.
For your comfort, I will be updating you every two weeks with emails to keep you in the loop, until the volatility ends…and as you all know…feel free to contact me anytime you need to answer any concerns you have. This will be another tremendous learning moment for us to all use in the future as we protect our assets and retirement. All the best!