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

Senior Portfolio Manager, Asset Allocation and Alternative Strategies

The pandemic slows the economy, but not the financial markets

After falling in March, global stock market indexes recovered in April a large part of the losses suffered, despite the worldwide spread of the COVID-19 pandemic. The pandemic has resulted in a major contraction of the global economy which may take time to reverse.

Focus on the past month

Overview of global equity markets*
  • In April, the Canadian stock market (S&P/TSX) rebounded by 10.5%, bringing its return for 2020 to -13.4%.
  • Wall Street also performed well, with the S&P 500 gaining 12.7% and the Nasdaq, 15.4%. Year to date, these two indexes are down 9.9% and 0.9%, respectively.
  • International stock markets were also in positive territory, with the EAFE Index ending the month up 6.3%. The return of this index for the first four months of the year is -18.6%.
  • Emerging market equities rose 8.6%, while Chinese stock markets climbed 4.4%. To date in 2020, the respective returns of these markets are -12.4% and 2.4%.

* All the percentages in this section are in Canadian dollars. Bloomberg unless otherwise indicated.

Key events


  • After having set new records in the first two weeks of February, the markets plunged following the identification of many new cases of COVID-19 in South Korea, Iran and Italy.
  • Central banks around the world have injected massive amounts of liquidity into the financial markets, while announcing significant cuts in their key rates.
  • For their part, governments have rolled out significant financial assistance measures for both businesses and individuals.
  • Investors seem for now to have decided to wait and see how the coronavirus evolves in countries that have already started their deconfinement.
  • In addition to having suffered from the health crisis, the Canadian economy and its stock market were hard hit by the sharp drop in oil prices resulting from the big decline in demand for oil and the price war between Saudi Arabia and Russia.
  • Job creation in Canada was severely impacted by COVID-19, as nearly 2 million workers lost their jobs, raising the unemployment rate in Canada from 7.8% to 13% in April.
  • In the United States, the jobless rate jumped from 4.4% to 14.7%, with almost 20.5 million jobs lost.(Source: Canaccord Genuity)

Our strategic monitoring

Main risks

The risks to monitor in the current environment are mainly related to the COVID-19 pandemic.

  • The coronavirus recession could worsen and lead to a severe depression, especially if a second, large-scale wave were to occur resulting in an extension or tightening of containment measures.
  • The negative, persistent impact of the pandemic on consumer confidence is likely to dampen consumer spending over a long period of time, which would lengthen the recession.
  • Relations between Beijing and Washington have deteriorated as a result of mutual accusations between the two governments over the origin and severity of COVID-19. These tensions call into question the signing of a second phase of the trade agreement between the two superpowers, as well as the initial agreement already signed.

Fundamental indicators

Some economic indicators have seen wide swings in the wake of the COVID-19 pandemic.

U.S. leading economic indicators
This index, which predicts future U.S. economic activity, abruptly went into negative territory following the decline on the stock markets and in new orders, and especially because of the sudden increase in jobless claims.

Corporate bond risk premium  
Credit spreads improved after central banks announced plans to buy and support corporate bonds.

Investor confidence   
The level of investor confidence rose in April, as many investors were encouraged by efforts to develop vaccines and drugs, as well as by the implementation of gradual deconfinement plans in different countries.

François Landry

Vice-President and Chief Investment Officer

Vice-Chairman of the Board of Directors of Professionals' Financial - Private Management

Our strategies

Pending more details on the worldwide evolution of the coronavirus at a time when various countries are gradually easing their containment measures, we are maintaining a neutral position in our FDP Tactical Asset Allocation Private Portfolio: 55% equities and 45% bonds.

We have underweighted EAFE equities, as Europe and Japan have limited means to revive their economies. Since emerging economies, particularly China, have this capacity and seem to have experienced the worst of the epidemic, we have overweighted the stocks of these regions.

The central banks of Canada and the United States also have good leeway to stimulate their economies. However, we have overweighted U.S. stocks, at the expense of Canadian equities, since the latter are too dependent on the oil industry, a sector currently in difficulty.

François Landry, CFA
Vice-President and Chief Investment Officer

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

Sources: Bloomberg

The opinions expressed here and on the next page do not necessarily represent the views of Professionals’ Financial. The information contained herein has been obtained from sources deemed reliable, but we do not guarantee the accuracy of this information, and it may be incomplete. The opinions expressed are based upon our analysis and interpretation of this information and are not to be construed as a recommendation. Please consult your Wealth Management Advisor.

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