As we continue to settle into self-isolation and the ongoing lockdown, governments around the world continue to react to the crisis through various measures aimed at reducing the spread of COVID-19 while also stimulating the economy.
In North America, several developments occurred this week, including:
- US Congress approved a fourth stimulus package, valued at $484B USD
- The stimulus package is aimed towards bolstering the small business rescue fund, provide support to hospitals and to expand on COVID-19 testing
- Justin Trudeau announced a new program that will provide rent relief to small and medium-sized businesses
- Businesses that have seen revenue decline by 70%, or have ceased operations, and pay less than $50,000 in rent will qualify
- Several states have begun to ease lockdown restrictions in the US, while in Canada, discussions are ongoing as to when various provinces will begin to ease restrictions
From an economic perspective, as expected, the volatility continued this week, with the major market indices swinging between positive and negative returns throughout as the market reacted to these developments.
The returns for the week are found here:
|Returns Week of April 20th
Source: Yahoo Finance
Another development this week was the collapse in oil prices that occurred on Monday. This was caused by several factors, including existing oversupply, and a continuing reduction in demand as many oil consuming industries have greatly scaled back operations during this crisis. A collapse in oil prices has large economic implications, particularly in Canada, which is a large oil producer globally. Oil analysts predict that many shale oil producers and fracking firms will not survive this crisis (Matt Egan, CNN Business: How negative oil prices could set the stage for the next price boom).
However, while oil prices collapsed early in the week, they rebounded quite quickly, with the markets following suit. We can see the predicted value of oil, and how it changed throughout the week.
Additionally, while the general narrative is negative, due to the ongoing volatility, and the state of oil prices, it is important to note that in general we have seen a strong market response since the current market bottom, which was March 23rd for most North American market indices. Since then, we have seen the TSX grow by 28.43%, the S&P 500 grow by 26.79% and the DOW grow by 27.88%. While not back to pre-crisis levels, it is encouraging to see this level of growth in such a short period of time.
If you would like to have a review to see how your investments have handled the current economic situation, or would like to review your investments in general, please reach out to set up a time.