Market volatility has persisted as the world continues to react to the Coronavirus, with most analysts predicting that this will continue throughout the lockout and the ongoing health pandemic. This update will outline what different governing bodies have done in an attempt to stimulate the economy and combat this disease, and what this means for your investments.
Over the course of the week, the following measures were implemented:
- The U.S. Senate and White House came to an agreement on a US$2 trillion stimulus package, while Canada passed emergency legislation to provide $82 billion in support to Canadians weathering the ramifications of COVID-19. It’s believed this will simply be the first leg of fiscal support from the Canadian government.
- Both the Canadian and U.S. markets were incredibly volatile, recovering from a large dip on March 23 with a powerful three-day relief rally that saw the Dow Jones Industrial Average return to a bull market and Canadian stocks on the edge of doing the same.
- Unemployment claims surged in Canada, as jobless claims had soared to almost one million by March 24. Unemployment numbers in the U.S. hit a record-breaking 3,283,000 (seasonally adjusted).
- The oil price war between Saudi Arabia and Russia continued unabated, and on March 25 the U.S. intervened, asking the Saudis reduce oil production.
- The World Health Organization stated that the U.S. could become the new epicenter of the COVID-19 outbreak, as Italy showed signs of stabilizing and Spain’s deaths continued to surge. It was estimated that by midweek, approximately 20% of the world population was subject to lockdown measures.
The effect of the various stimulus packages were felt almost immediately, with the markets showing positive growth for the first time in several weeks. The returns, as of the end of day Thursday, were:
|Returns Week of March 23rd
|S&P 500 (US)
|Dow Jones (US)
This growth, while likely short term and caused by the stimulus package, illustrates the reason why keeping your money invested, while stressful, is the right thing to do long term. The market bounce back typically happens fairly quickly, and, as illustrated in the previous update, missing out on some of these returns can have a long term impact on your investments. For example, all three markets had record breaking, or near record breaking returns on Tuesday the 24th, with all three showing the following returns:
|Returns Week of March 24th
|S&P 500 (US)
|Dow Jones (US)
We can also see this illustrated in the following chart, which shows global returns since 1985, and how the market reacted to several major market downturns.
GLOBAL STOCK MARKET (JAN 1985 – DEC 2019)
Global stock market returns represented by MSCI World Index. Source: Morningstar.
This example is for illustrative purposes only and is not intended to be representative of the performance of any actual or future investment available to investors. It is not possible to invest directly in an index. Returns are calculated in Canadian dollars and assume reinvestment of all income and no transaction costs or taxes for the period January 1, 1985 to December 31, 2019. Actual client returns would be different due to fees and expenses associated with investing which are not applicable to an index. For purposes of this illustration, a bear market is defined as an index falling at least 20% from a previous high.
As shown, the markets typically quickly rebound after these events, re-confirming the idea that keeping your funds invested in the market, is the best thing for the long term. However, we appreciate that this is a very stressful time for everyone and are more than willing to set up a call to discuss your investments, and how they are positioned to perform in this environment. Additionally, we can go through your goals to see if your investments need to be adjusted based on the current market situation. If you would like do so, please email me at [email protected] while cc’ing Brenda Fish at [email protected].