March Monthly Update and Covid 19 Update 6
The discussion continues as to the balance between economic collapse and the value of saving lives. A very sensitive and dangerous topic no doubt but it is interesting to note that economists due take into consideration the value of a life vs. an economic cost. One study has taken it farther and indicated that in the 2008 - 2009 market crash and resulting recession life expectancy of a 42 year old was reduced by 3 months!
I'm sure I am not alone in my stress levels being elevated the past few weeks. So I've increased my walking...and deep breathing...and drinking....
Zoom video mistake...Careful if you are doing some day trading. Zoom videoconferencing has been quite popular since COVID took over. However another company known as Zoom Technologies has been purchased by quite a number of people by mistake. Eventually trading was halted when the stock that was worth less than $1 was trading at $60! It's now at $10. So do your homework!
And according to John Authors, Bloomberg, 'Don't expect volatility to change for a while.'
Goldman Sachs Group Inc. revised its forecast for second-quarter U.S. growth lower to an annualized minus 34%, with unemployment soaring to 15%. Still, economists at the bank see a mainly short-term hit, expecting a strong rebound in the third quarter. Hopes for the shutdown being relatively brief were bolstered by signs of stabilization in the number of new cases of the virus reported in the worst-hit areas of Europe, with the World Health Organization saying the outbreak in Italy and Spain may have peaked. While numbers from the U.S. are likely to continue to get worse, the rise in confirmed cases in New York is slowing
US banks are reducing their dividends but here in Canada CIBC has confirmed they have no such plans...which goes back to my last few notes with recommendations on buying the bank ETF and locking in that yield!
Summary from a recent conference call provided by RBC
Overview · The move in credit spreads over the last month has been the fastest in history (350 bps in January to 1100 bps) and a lack of liquidity due to portfolio rebalancing exasperated the speed of the sell off · Markets have somewhat snapped back as the liquidity problems within the fixed income market have been addressed, however to see a lasting turnaround in risk appetite, the health of the population must be addressed with progress against COVID-19, including more efficient testing and vaccines Currency · The USD has appreciated against all currencies, driven by funding and liquidity disruption, and the CAD has fallen victim from a combination of the USD strength, weakness of oil prices and hit to global growth from COVID-19 · As a result, USD is in the overshoot territory against CAD by 22% vs. long term fair value (which is $1.18), and consequently the team favors buying US assets on a currency hedged basis Portfolio Positioning · The team is adding to risk now and both confident and excited about future return and yield opportunities · 10-year sovereign bonds in Canada and the US are yielding 0.5-1%, and therefore the team is taking advantage of the opportunity to invest in high yield bonds at 10% and EM sovereign bonds at 7%, and believe that over the next 2-5 years these asset classes will bring returns on overall fixed income strategies higher Outlook · There are some longer term signals that the team is looking for to restore market confidence, including a peak in new cases outside of China, a drop in number of deaths or the development of a vaccine. They think the markets are going to bottom before these developments occur, but are seeing some positive shorter-term signals emerge that support the continued adding of risk BREAKING NEWS (I know I said to stop watching breaking news but this literally just came out!)Another 6.6 million joined the U.S. unemployment ranks, bringing the two-week total to a staggering 10 million as the pandemic upends the economy.Thursday, April 2, 2020 8:42 AM EST The New York TimesThe new claims for unemployment benefits set a grim record for the second straight week. The speed and scale of the job losses is without precedent. Until last month, the worst week for unemployment filings was 695,000 in 1982.