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Yann Furic
B.B.A., M. Sc., CFA

Senior Portfolio Manager, Asset Allocation and Alternative Strategies

Hard decisions

The past week has been very difficult for the economies and people of many countries around the world. Governments are now ordering voluntary or mandatory isolation. Travelers in particular are being asked to self-isolate, but everyone is affected.

The aim of these severe restrictions is to quickly halt the spread of the disease, rather than adopting gradual measures, which could prolong the situation.

Sign of the times

The effect of the pandemic on global economies is already being felt and fears of an even more pronounced slowdown have prompted Canadian, American and European government authorities to put in place major financial assistance programs and tax measures for businesses and individuals. Their primary goal is to stabilize people’s incomes and avoid company bankruptcies.

These announcements are excellent news, but the programs need to be rolled out quickly for them to have the desired effect.

Central banks to the rescue

Central banks continue to inject liquidity into the financial system. The huge amounts invested and the speed with which the measures have been implemented should have a stabilizing effect on the system.

The bond markets are still not functioning properly, but the massive injections of liquidity should help restore some normality. Deeply concerned by the situation, the U.S. Federal Reserve recently announced that it was ready to buy corporate bonds in an attempt to stabilize this market

To be or not to be… in récession

Right now, we might be in a recession, given that the term “recession” implies two consecutive quarters during which gross domestic product (GDP) is in negative territory. The first quarter ending March 31 will certainly see negative growth. As for the next quarter, the contraction is expected to continue in April, and the rest of the quarter may be unfavourable.

Turbulent markets

Volatility persists in the markets, which repeatedly experience both sharp declines and meteoric rebounds. The market is reacting strongly to the news: it is ruled by uncertainty and fear. Since the current crisis grew out of a health issue, it cannot be compared to the financial crisis of 2008, for example, in terms of how it originated and how it will evolve. The effect of the COVID-19 pandemic has been felt by the stock markets as a major shock.

Take the analogy of a pebble thrown into the water: the amplitude of the ripples is greatest at the point of impact. As the ripples disperse, their amplitude decreases. We’re currently going through the most difficult period, the point of impact which causes the greatest turmoil. We’ll find out the real magnitude of the economic effects in the coming weeks.

Some good news

As we have learned in recent days, China is not reporting any new local cases of infection. South Korea, for its part, may have passed the inflection point in terms of new cases identified.

This good news should lead to the imminent roll-out of the infrastructure projects previously announced by China. In the coming quarters, the implementation of these projects will likely have a positive effect on the energy, basic materials and industrial products sectors, as well as the financial sector.

Strategies to protect our clients’ assets

Our management philosophy is focused on capital protection. This approach is reflected, among other things, in the selection of portfolio managers who add value to our investments relative to the indexes, particularly in down markets. Since the start of the crisis, our managers have continued to add value.

Obviously, the sharp fall in the markets has led to an imbalance in our clients’ portfolios, whose equity weighting is currently less than that of bonds. Tactically, we have increased the weighting of equities, but this has not offset the overall imbalance.

We continue to favour the shares of big companies that have little debt and that are less cyclical. Our managers remain vigilant and are closely monitoring the stock markets.


In the near future…

The markets will remain volatile, but prudent, long-term management should allow us to take advantage of new opportunities.

The global economy will slow considerably, but temporarily. With the help of monetary and fiscal policies, it should pick up again in the second half of 2020.

We’ll keep you informed of any new developments. Contact your advisor for any questions or concerns you may have regarding your investment portfolio.


Yann Furic, B.B.A., M. Sc., CFA
Senior Portfolio Manager, Asset Allocation and Alternative Strategies

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