Market headlines have continued to dominate the news and the majority of these headlines have been negative. While we have certainly continued to see volatility, we thought we would devote some column space to highlight the good news, which in our opinion has been under-reported.
This week the U.S. Congress approved a fiscal package worth over $2 trillion. It features support for individual households, unemployment benefits, loans to businesses, aid to hospitals and funds to help bolster businesses affected by the pandemic.
Canada also passed a large stimulus plan to help its economy. In fact, almost every government across the globe has promised to do everything in their power to stabilize financial markets and the global economy. Over the past couple of weeks, a new round of credit programs and/or monetary easing has been announced. Once the market has time to digest these measures, it is bound to respond positively.
Given the government and monetary authorities’ responses, we anticipate double-digit gains in equity indices over the next 3-4 quarters. Despite the fact that we expect severe deterioration in global economic activity over the next quarter, we anticipate economic activity, profitability of companies and performance in equity indices to be better by the end of this year and to continue on a positive path into 2021.
Stocks typically begin to rise three to six months before a recovery. We believe we’re already in that window and that stocks will begin to recover long before the pandemic effects begin to wane. The strongest bull markets are often not built on a foundation of good news, but rather on fading bad news.
Like all market declines, this downturn will create winners and losers. While this extreme volatility is anxiety producing, it may also present buying opportunities we haven’t seen in a number of years.
Our job as your financial advisers is to manage risk and focus on the future. We take our responsibility to you very seriously and remain committed to providing you the best service and advice possible.
*Past performance is no guarantee of future results.