Ottawa has 'flexibility to go further' to cushion Canada's economy: Mark Wiseman
It’s been a wild week for Canadian investors. Stocks have whipsawed, with the benchmark S&P/TSX Composite Index flirting with bull market territory after plunging 34 per cent from February’s record highs. There’s also been volatility in the bond market as investors seek safe havens and weigh central bank rate cuts designed to cushion the blow from the COVID-19 outbreak.
Here’s a look at some recommendations from top investment professionals on what to do, and what not to do, in these volatile times.
David Rosenberg, chief economist and strategist, Rosenberg Research & Associates:
“There are true bargains out there in areas of the equity market that were the proverbial ‘babies thrown out with the bathwater’ in the recent meltdown that have strong underlying fundamentals and solid recurring cash flow streams. I am thinking multi-family REITS, utilities and telecom; and each company you buy should be screened for balance sheet strength.
“Canada’s recession is going to be even deeper and the recovery shallower, and there are precious few alluring investment themes here at home compared to what you can pick and choose from south of the border. For yield, I would suggest moving out of G7 bond markets and into the emerging market fixed-income universe where the basis-point pickup is considerable. I would definitely avoid any company that is the recipient of bailout money and any company that artificially engineered its earnings via share buybacks in the last bull market.”
Mark Wiseman, former Canada Pension Plan Investment Board CEO
“These are very difficult times for even the most experienced investors. … It is extremely difficult to time markets. Trying to time these markets is a fool’s errand, you just don’t know where things will go. … It’s hard, and you just to have to take that long-term view. It’s impossible to be an automaton. In the investment horizon most people have, you have to avoid deviating from your principles. A day’s trading, an hour’s trading, it doesn’t matter. You need a long view if you’re an investor, not a trader. Stick to you knitting, don’t panic and try to keep a cool head.”
Brian Belski, chief investment strategist, BMO Capital Markets:
“I’ve called for a 40-to-50-per-cent rally from the lows. I think the lows are in, though timing remains fluid on when things rebound.
“My favourite sector is communications. This is a changing world – people are going to be glued to the couch at home. People are watching Netflix, they’re watching Disney +, they’re watching YouTube. These are opportunities. In terms of the worse thing [investors] can do, they should not be selling now, they should not be getting into fixed income. Bull markets are born of bear markets.”
Kurt Reiman, chief investment strategist, Blackrock Canada
“In our tactical asset allocation framework, we focus on four equity style factors: momentum, value, quality and minimum volatility. These last two – quality (companies with sound balance sheets) and minimum volatility (companies that have historically exhibited lower volatility) – tend to perform best during periods of either slow economic growth, like the period that prevailed prior to the coronavirus outbreak, or during a contraction in activity like now. We’re overweight both positions in our factor exposure framework.”
Barry Schwartz, chief investment officer and portfolio manager, Baskin Wealth Management
“If there were good reasons why you bought everything in your portfolio and you can justify that those companies will be here for the long term, then do nothing. I have no doubt that a number of companies won’t ever regain their lofty highs but it is too soon to make that kind of decision. Doing nothing and holding on is the right decision and it is a powerful action. You must tame your animal brain and think rationally.
“If you have cash, scale into this market. Don’t be a hero and spend it all in one day. If you are retired or close to retirement, take out a year’s worth of cash flow from your portfolio to tide you over.”