Commentary for February 2020

COVID-19 COMMENTARY

The past four days, major markets have sold off around 10% from the peak. While I’m not a medical expert (But I know how to use google!) the coronavirus (COVID-19) appears to be highly contagious. In addition, the vast majority of cases are quite mild, but it allows someone with a mild condition to spread it more easily as they are up and walking around. The flu season typically dies down once the weather warms up and the lack of a significant outbreak in Australia leads me to believe it will be somewhat seasonal. In the event that it doesn’t die down and becomes a pandemic, as the vast majority of cases are mild, I expect things will normalize over time. 

For my clients investment portfolios I haven’t made any changes in the past 4 days. I don’t think we should be selling our holdings over this. In the event that it becomes a pandemic, it won’t last forever. The end result would likely be massive government stimulus. 

I would expect Governments arounds the world to announce stimulus to boost the economy, which would have no positive impact during the pandemic, but once it’s over would be highly stimulative. 

I’m not doing any buying yet, however if this blows over we will have missed an opportunity. On the other hand if this turns into something more serious, the market will likely produce some exceptional bargains. I put the recession odds at 50% over this event. My advice financially is to take a wait and see approach. In the event of a major global pandemic, our portfolios are secondary considerations. 
Crowd panic is when the crazy people are making sense, and the sensible people seem crazy. 

Sincerely,

Mark Smith-Windsor, CPA, CMA®, CFA®

As always I am available for any questions, financial or otherwise, at 306-385-6261 or at msmithwindsor@iagto.ca