April 2020 Portfolio Management Team Update
Market & Economic Environment: March 2020 will go down in history as the month of the “Coronavirus Crash.” Global stock markets posted their biggest monthly decline in decades and the worst quarterly performance since 2008, as the worldwide spread of the coronavirus triggered unprecedented shutdowns in most regions of the global economy.
The TSX fell 17.7% in March to finish the first quarter (Q1) down 21.6%. All 11 sectors on the TSX finished in the red in the quarter, as Energy, Healthcare and Real Estate declined at least 30%. The Canadian dollar fell below 70 U.S. cents, while crude oil slumped by a record 65% in Q1. The S&P 500 tumbled 12.5% in March for a Q1 plunge of 20.0%, while the Dow Jones slumped 23.2% for its worst quarterly performance since 1987. Most major markets in Europe and Asia also fell at least 20% in Q1.
The month finished on a much better note than it had begun, as markets staged a massive rebound in the last week of March that carried over into the first two weeks of April. The TSX surged by a record 12% on March 24, as North American equities commenced a recovery that clawed back part of the steep losses inflicted in the preceding four weeks. The market recovery was fueled largely by optimism that the number of coronavirus cases and fatalities in the worst-affected regions such as Italy, Spain and New York are leveling off, as well as record levels of fiscal stimulus in Canada and the U.S. (Data Source: FactSet)
Our Strategy: At the present time, there is growing confidence that the worst-case scenario of overwhelmed health care facilities and a prolonged lockdown of the global economy has been averted. Stocks have surged from their March 23 lows, and our portfolios have participated in most of the market upside since then. Our balanced portfolios also held up very well during the steep correction, bolstered by their diversified holdings and blue-chip stocks.
The Portfolio Management Team (PMT) rebalanced client portfolios in the first half of March, trimming profitable positions in fixed income and adding to positions in blue chips that had plunged. The PMT anticipates market volatility to abate from its extremely elevated levels in March, which could put a floor under stocks and enable them to retain most of their recent gains. While the economic environment remains uncertain, the relief measures and actions taken by governments and central banks may make a potential recession a relatively short one. The PMT intends using significant dips to add to positions and will continue to make ongoing adjustments to client portfolios as required by market conditions.
Please contact any member of the PMT if you have any questions or concerns regarding your accounts.
This information has been prepared by Luft Financial. Opinions expressed in this article are those of Luft Financial only and do not necessarily reflect those of IA Private Wealth. Furthermore, this does not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors.
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