Throughout Canada and the US, states and provinces continue to scale back on the lockdown regulations, with markets generally performing well with the expectation of an economic re-opening. Additionally, several other developments, both at home and abroad, occurred, which also affected the markets.
A list of these developments can be found here:
- Justin Trudeau announced the first round of clinical trials on a vaccine were approved and will be based at Dalhousie University (source: CBC.ca – Haley Ryan: Canada’s first COVID-19 vaccine trials approved for Halifax university)
- Daily rates of new cases has dropped to an average of 1,200, the best rate since early April (source: CBC.ca – Coronavirus: What’s happening in Canada on May 18)
- On Friday of last week, after the last market update was sent, US Congress agreed on an additional stimulus package valued at $3 trillion USD; however, indications are that it will have a tough time getting through the Senate (source: USAtoday.com – Maureen Groppe and Ledyard King: House passes $3 trillion coronavirus stimulus plan, faces pushback in Republican-led Senate)
Market returns for the week can be found here (please note that the market was closed on May 18th in Canada).
The returns for the week are found here:
| Market Index | Returns Week of May 18th |
|---|---|
| TSX | 1.88% |
| S&P 500 | 3.20% |
| DOW JONES | 3.29% |
Source: Yahoo Finance
When looking at returns and overall performance, it is important to look at everything in context. The three indices we have been looking at had a peak value in mid to late February, and all had a current low point on Mar 23rd. You can see these values, as well as the dates they occurred, here:
| Market Index | Previous Peak | Current Low |
|---|---|---|
| TSX | 17,944.10 (Date: Feb 20) | 11,228.50 (Date: Mar 23) |
| S&P 500 | 3,386.15 (Date: Feb 19) | 2,237.40 (Date: Mar 23) |
| DOW JONES | 29,551.42 (Date: Feb 12) | 18,591.93 (Date: Mar 23) |
Source: Yahoo Finance
These figures show that in just over a month, each of these indices dropped the following amount:
| Market Index | % Drop Peak to Current Low |
|---|---|
| TSX | -37.43% |
| S&P 500 | -33.92% |
| DOW JONES | -37.09% |
Source: Yahoo Finance
These returns are some of the worst seen in memory, particularly over such a short period of time. To put this in context, over the course of the full year during the 2008 market crash, we saw the TSX drop by 35.02%, the S&P 500 by 37.00% and the DOW JONES by 33.84%.
However, much like the 2008 crash, we have seen a substantial bounce-back. The returns from the current low to the market close on May 22nd are:
| Market Index | % Return Current Low to May 22 |
|---|---|
| TSX | 32.82% |
| S&P 500 | 32.09% |
| DOW JONES | 31.59% |
Source: Yahoo Finance
The returns seen since March 23rd have been exceptional and have certainly help to alleviate the economic effects seen by this health crisis. That said, the markets are still considered to be volatile, with the VIX closing today at 28.16, which indicates that the markets are still considered to be in turmoil. Additionally, as discussed last week, there is ongoing concerns that the returns seen are stimulus driven and not representative of the true market value for these indices. Last but not least, there is concern that a second wave of this pandemic will negatively affect the markets. As such, our recommendation remains to stay invested and to ensure your investments are diversified while still holding to your investment objectives. Please let me know if you would like to have a call to discuss how your investments have rebounded or would like to schedule a review in general.
