Update on Market Volatility, Oil and Coronavirus

Update on Market Volatility, Oil and Coronavirus – March 10, 2020

In light of a very volatile day in the markets yesterday, we wanted to provide you with some commentary to help you understand what’s happening and why. The GLC article Perspectives on current market volatility, oil and coronavirus mentions investing in turbulent times, a market update – what’s happening and why, the North America Bond yields fall to historic lows, policymakers take steps to support the economy, and diversification is your friend in times of volatility.

Your long-term portfolios have been designed with downside protection in mind, which is why when compared to the indexes, the paper losses are not as drastic and we’d like to reinforce that your investment plan was designed specifically to your investor risk profile and time horizon. 

Update on Market Volatility, Oil and Coronavirus

Source: RBC Global Asset Management Ltd.

Keeping a positive frame of mind

Here are some of the positive developments that comprise the global backdrop:

  • Robust economic data: US hiring in February was unusually good, making the point that even as COVID-19 was spreading through China, capturing headlines and disrupting supply chains, US businesses still felt optimistic enough to continue hiring.
  • Resiliency of Chinese Equities: Although China was the source of the viral outbreak and its economy has been most damaged by COVID-19, the Chinese stock market has been among the strongest in the world so far this year. The Chinese stock market appears to be assigning a temporary impact to the coronavirus, though it is easier to reach that conclusion in China where the number of infected is in active retreat.
  • Policy makers are on the side of the market: Last week, the U.S. Federal Reserve announced an emergency rate cut and the Bank of Canada followed suit at their regularly scheduled meeting. While rate cuts from Central Banks aren’t the perfect tool to combat the virus, they make solvency programs less likely, boost market confidence and add liquidity to the economy.
  • Improving valuations: As a result of recent market declines, valuations have been more attractive, while the bulk of any economic damage is likely to be temporary rather than permanent.

When markets are focused on a specific risk event, it can be difficult to look past the short-term noise. While daily market fluctuations can be unsettling, it’s important to maintain perspective along the path to achieving your long-term goals. Virtually every year is accompanied with a catalyst that gives investors reason for pause. In the short-term, these types of negative shocks – whether driven by financial, political or medical events – almost always lead to weakness in risk assets. Over a long-term horizon, markets have historically proven resilient and ultimately remained on an upward course.

Source: RBC Global Asset Management Ltd.

This type of volatility and equity market declines provide excellent long-term investment opportunities.

Please get in touch with us if you’d like to find out more.
Dave, Kelly and Ryan