A Message from ZLC Wealth: March 31st COVID-19 Update
It’s March 31st, and here’s what we know…
The following article has been reposted from ZLC Financial affiliate ZLC Wealth Inc. ZLC Wealth’s Portfolio Managers’ are here to serve our clients and provide guidance and peace of mind as we navigate these trying times. If there ever was a time to reflect on risk, and financial impact of risk, our ZLC is here to help. Please stay healthy, safe and reach out to our ZLC team, should you need anything at all.
Think back three months. Most of us had never heard of the novel coronavirus. Now it is all we talk about – how to avoid it, how many have it, and what it is doing to our lives and the economy. My three kids are all living in self-imposed quarantine and won’t even hike with us for fear we’ll get it! We live in a new normal.
Our new normal also includes a lot of forecasting. In a world where toilet paper, disinfecting wipes and face masks are in short supply, economic and market projections are piling up. I must get about 10 letters a day and I’m sure you do too. So, with that in mind, I’ll keep this short.
We cannot tell you where the market will be tomorrow, next week, next month or next quarter. Market timing is impossible, not just for us but for everybody. Who saw the COVID shutdown? What we can tell you is we think there will be a bottom and we think holding investments in companies that can weather the storm will be profitable. Our managers are invested in these assets. We think it is time to stay invested, and over the coming weeks and months to consider deploying any excess cash where risk tolerance is appropriate.
Here is what we know:
- COVID-19 is still rising outside of China, with the world numbers hitting over 800,000 confirmed cases. Actual cases are probably much higher and the number of deaths continues to climb especially in Italy, Spain, France and the US. There is still no widely accepted treatment or vaccine, although progress is being made. There are some signs the growth curve may be flattening. Spain’s Foreign Minister says the curve is flattening with 6,400 new case on Monday, the lowest in two weeks (BBC News).
- Nearly all of China’s major industrial companies have headed back to work (Wallstreet Journal).
- World GDP is down and will be down for some time. Morgan Stanley has predicted significant US GDP loss in the second quarter of -30%, with significant re-growth in the third quarter of +29%.
- The US Federal Reserve Bank is showing it is basically prepared to keep adding liquidity as needed to keep the economy going.
- On Monday, oil prices have dropped to a 17-year low with West Texas Intermediate (WTI) going below US$20 and the Western Canadian Select (WCS) hitting US$3.82, a record low. These prices are devasting for Canada and especially for Alberta. On the plus side, TC Energy (formerly Trans Canada) gave the go ahead on its Keystone XL pipeline with backing from Alberta. The Canadian oil and gas sector rose today; iShares S&P/TSC Capped Energy Index was up 14%.
- JP Morgan said Monday: “Risky markets should remain volatile as long as infection rates create uncertainty about the depth and duration of the COVID recession, but enough has changed fundamentally and technically to justify adding risk selectively. Most risky markets have probably made their lows for this recession, except perhaps oil and some EM currencies beset by debt-sustainability issues.”
Through all this, the investment team at ZLC Wealth continues to review all the data. We don’t know when these trends will reverse and markets return to normal, but we know they will, and we will continue to manage portfolios that balance risk with opportunity for our clients.
Our staff are all working hard, although much of our activity is currently done remotely. We have the technology to continue to open accounts, trade, and do all the things we need to do.
Let us know if you have any questions.
Best regards and be safe,
– Jon McKinney, President & Portfolio Manager, ZLC Wealth
Article reposted from ZLC Wealth’s March 31st 2020 Special President’s Letter.
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