BY DREW FINERTY
I hope this update finds you all coping well as we progress through the global difficulties of the COVID-19, and now the Social unrest over systemic racism we have all seen unfold since my last update. We are truly living in changing times and an extraordinary opportunity for a new world that we will encounter as we all come through these issues together. Given, the markets have rebounded (surprisingly) nicely since the lows of March 23rd and we now have a sense of a new-normal, I decided to send my updates on a monthly basis, until we are through the pandemic.
OPEN for Business…one month later:
It has now been almost a month since BC and most of the rest of our country and the States re-opened their economies. As I mentioned in my last update, the first few weeks were going to be telling on how we can expect the virus to show itself, and what that would mean on the markets and the economy. On top of this historic viral interruption, never did I expect to see the unbelievable video of more racial injustice by white police on black victims that transpired in the murder of George Floyd in Minneapolis a few weeks ago and again a few days ago in Atlanta with the shooting of Rayshard Brooks. Watching the protests and subsequent riots left me feeling very sad on how our society is behaving in the 21st century and wondering what psychological toll it will present to an already fragile public, trapped in isolation for almost three months.
Almost in defiance of such global unrest, the economy is starting to show signs of life in some sectors. The unemployment numbers have marginally improved in both Canada and the US, but are still at historical record highs that can’t be dismissed. The government stimulus/relief programs have been seen as a success and the results have seen unbridled market optimism over the re-openings and hope for a short term recovery in the economy. Until late last week, the global stock and bond markets have been amazingly positive amidst a hope that we will see a “V” shape recovery from the bottom and it may be short-lived. Many professional Money Managers and Portfolio Managers are mystified with the apparent optimism on Wall (& Bay) Streets, when Main Street is still feeling the punishing effects of a three month shut down. Some of the reasons for the recent behaviour of the stock markets were: 1) the lift that companies like Amazon, Netflix, Zoom and other Tech/Entertainment type sectors were providing the overall market. 2) in recent weeks, other COVID-impacted industries like airlines, oil/gas, hotels, and travel related companies were rebounding which made the breadth of the markets more optimistic. 3) the impact of government and Central Banks providing stimulus was working and the economy was surviving. 4) the re-openings were being widely supported and some normalcy was returning to every day life.
However, the last week showed a more expected response to the reality of everything that has happened with the re-opening and the social unrest. Growing numbers of cases in many US States and in Ontario & Quebec here in Canada, has some experts thinking this could be the start of the expected second wave of the virus, at the same time social justice starts taking hold. Global markets showed the first negative week in almost a month last week, pulling back from recent positive returns, leaving the DOW about 40% above the low, but still about 12% off the high. I am still in the camp that believes the recovery will be a “W” and this week may be the start of a shorter & lesser decline than the first, but that there are still some headwinds in front of us before we see the more reasonable, expected recovery over the next 6-18 months. Almost all the analysts I listen to daily, feel that 2021 is going to be a “very good” year and economic growth will be strong. So my narrative is to still be patient, don’t worry about the short term and look forward to better days in the not-to-distant future. As Dr. Bonny says: “this is not forever, it’s just for now” and “be kind, be calm & be safe” and we will all get through this together.
As I mentioned last update, the markets will recover from these events and the short term is not indicative of the long term. The March statement shock will be tempered by the June statement if the last few weeks remain stable and our portfolios show some healthy rebound from Q1. There are many opportunities in front of us and patience will be rewarded. I still believe that now is a good time to “re-balance” your portfolio to include some additional longer term Growth choices that include technology and other science & entertainment options, if your risk tolerance allows you to think more long term. The Balanced 60/40 portfolio that almost ALL my clients own, is a very LOW risk portfolio that will defend well in times like this, but won’t reward as well as some others I have mentioned, during the recovery and over the long term. Many of you have taken the time to discuss these options and I feel strongly that a percentage of your portfolio will provide better overall returns, while keeping to a conservative and balanced portfolio, so let me know if you have any questions or interest in learning more about these type of funds.
As of right now, we are remaining patient with our re-opening. We were considering re-opening July 1st, but given the summer months are much quieter, we may take a “stay-cation” for a few weeks and we are seeing more new cases of COVID around the world, I have decided to keep the office closed for the summer. I said this last update, but will repeat it here, I have a lot of Senior clients and I want to ensure everyone is safe before we open. I am expecting an increase of cases (even though the Island has not been to badly affected) to continue with the general restart of the economy and the number of public protest rallies that are hard to social distant at, so I will remain diligent in my need to protect my clients. My plan is to see how the experience goes here in BC, the rest of Canada, and especially in the USA, before making a decision on a re-opening date. There are still a lot of new daily cases and deaths south of the border and I am not willing to risk any of my client’s health for the sake of opening too soon. I have been hosting ZOOM video meetings 2-3 times a day with clients and our Team, and so far, everyone I ask, has enjoyed them and found them valuable to actually meet face-to-face. If you would like to me to set up a video meeting, don’t hesitate to let me know by email or phone, so I can send you an invite by email. I am also available any day to speak with you on the phone or by email, if you are more comfortable with that form of communication.
I hope you are all healthy and well…stay safe, wash your hands a lot and continue to practice physical distancing if you must go out into the world…all the best, cheers!