Equity markets have been very volatile since last week. Last week’s quick plunge of more than 10% on the S&P 500 was followed by a strong rebound of more than 4% on Monday, March 2. This volatility will likely persist for some time.
The G7 finance ministers and central bankers held a telephone discussion on the steps to take to prevent the global economy from falling into recession. Following this call, the G7 countries said they would do everything possible to limit harm from the coronavirus.
Benchmark rate cuts
In the United States, the Fed decided to cut its benchmark rate by 0.50%, which was not expected by the markets. This is the first emergency rate reduction announced since the start of the 2008 financial crisis.
On our side of the border, the Bank of Canada cut its key interest rate by 0.50% on Wednesday, March 4, bringing it back to 1.25%. The central bank also admitted that the Canadian economy would not grow as forecasted in the first quarter.
Uncertainty related to the coronavirus will continue to be felt, but a growing number of governments have started discussions on the fiscal measures to put in place to help businesses, among others, as well as the infrastructure programs that could be initiated to stimulate their economies.
Investors: stay the course!
Our recommendations remain the same: during this period of turmoil, stick to your investment policy and stay invested. Despite market volatility, our managers are prepared to react quickly to protect the portfolios. Your investment policy remains your best guide in the current environment.
If you have any concerns, discuss them frankly with your advisor.