Hey everyone and welcome to another weekly recap post for May 15, 2020. So many things are happening that I feel like I need to publish these things on a daily basis!
Now for my disclaimer: this post contains affiliate links where the blog may receive a small commission on any sales from EQ Bank, Questrade and Tangerine.
Depression Era Unemployment a Bad Omen
I’ve watched the market rally for well over a month now and I’m scratching my head.
The financial news is terrible and each day seems to get worse. Bankruptcies are rising fast as the economy is well into the 2nd month of shutdown.
Industries, such as hospitality and tourism, are being destroyed and it will take years, maybe even a decade to recover from the losses.
On Wednesday Fed Chairman Powell said that we need fiscal stimulus to avoid a depression.
We Desperately Need to Restart the Economy
More and more people are calling for the economy to reopen. And I’m starting to agree with them.
In fact, Conrad Black referred to the lockdown as “an unprecedented international act of self-impoverishment.”
Unemployment rates in the US and Canada are nearly 20%. Divorces, domestic abuse, child abuse, mental illness and suicides, people battling treatable diseases etc. Everyone is suffering.
When all is said and done, what will the fatality rate from Covid-19 really be? I’m guessing less than 1% and maybe even less than 0.50%.
One of the major reasons for the lockdown was to protect people at risk (ie. ICUs, senior care homes, First Nations reserves etc.) The virus has spread to them all and the results have been catastrophic.
So we failed to protect the very segments of the population that justified the lockdown in the first place.
Further complicating matters, the virus seems to still be spreading even as hundreds of millions are in isolated lockdowns.
There’s no question that we desperately need to restart the economy but are we ready?
What Is the Pathway Out of A Pandemic?
When we look back on this period 5 years from now, I think the most glaring mistakes will be that we walked into this pandemic blind, we navigated it blind and we opened back up totally blind.
First off, I said before that we need to have a robust and extensive testing program with tests that actually work!
The perfect time to administer these tests, of course, is when we are all isolated in our homes, not when we lift restrictions and open up.
But at this stage, as we are on the cusp of reopening, we are nowhere near where we need to be on the testing front. So we have failed to effectively test.
Next, I said we need to have some kind of treatment for Covid-19. We don’t…I mean what can I say, we have a bunch of experimental drugs that may or may not be great.
Finally, I said we needed to have some kind of a vaccine in development. We are nowhere near that stage although there is extensive work in that area. But realistically speaking, many scientists have said that we may never get a vaccine at all.
So where does this leave us? Well I think for sure we’ll likely see a massive 2nd wave that may very well overwhelm the health care system.
It seems like we all just decided that the pandemic was over and are carrying on with life.
The only thing wrong with that assumption is that the virus gets a vote too. And as I said above, we aren’t close to where we need to be in the war on Covid-19 to open.
But we need to restart the economy to avoid something worse than the Great Depression.
Forget a V-shaped recovery this will be an L shape recovery and we may be worse off in the Fall when the massive second wave hits.
None of this is good news and points to more pain for investors, but that hasn’t stopped me from carrying on with my financial plan.
Yes I’m Still Investing!
Of course I’m still investing though. Governments around the world are throwing the kitchen sink at the economic pain caused by the pandemic.
This will eventually push up asset prices across the board.
So many sectors are looking attractive right now…like banking and energy for example. If you’re a long-term investor like me then you may want to consider nibbling away here.
This week I bought some oil stocks. Not just any oil stocks, the most hated ones like Cenovus (CVE) and Suncor (SU). I’m pretty sure I’m early to the rally in energy stocks but I’m OK with that. Pipelines are being built and sooner or later global demand will pick up.
Who knows, maybe…and I may be going out on a limb here…Canada will change its insane energy policy. That would cause the sector to come roaring back.
I also bought some gold stocks too. Gold will do very well in this super stimulus environment. Plus it’s a good portfolio stabilizer when the market dives.
My bread and butter portfolio will always be blue-chip dividend stocks and index funds, but when I see real value like in energy or opportunity like gold I can’t resist.
I think also banks and REITs are looking pretty good here too. It looks like they’ll be testing their March lows.
What can I say, timing the market was never really my thing so I buy when I see opportunity and value.
Save, Invest, Build Wealth and Prosper
In case you’re wondering here’s where I park my money and some financial services that I use:
For my Daily banking and no-fee cash back credit card I use Tangerine. Curious? Check out my Tangerine vs Simplii Financial review and the Tangerine Money Back Credit Card Review.
For my Savings I use the EQ Bank Savings Plus Account. Never heard of it? Click the link to check out my EQ Bank Savings Plus Account Review.
For investing I use a combination of TD Waterhouse (for legacy investments) and Questrade (low cost stock purchases and free ETF purchases). If you haven’t done so already, check out my Questrade Review to see why it’s the best deal around. Get $50 in Free Trades when you signup for Questrade through this link.