March 10, 2020 | Not a Time to Panic nor Freeze

As I explained in February, coronavirus is a catalyst not a cause of a much-deserved and synchronized repricing in global asset markets.  If you thought rising corporate security prices the past couple of years were justified, but that recent declines are ‘irrational’, you’ve missed the plot here.  If your financial adviser or manager is telling you this, an independent review of your present holdings (by someone not on the product sales side) is needed stat.

Tumbling yield spreads, crashing oil and freezing capital markets are a triple whammy for Canadian banks that are levered on rising defaults in highly indebted corporations and households.

As I have pointed out many times, financials are the largest sector weight in the TSX (32% of its market cap)–prices down 17% 20% since February, 6% 10% just today (not defensive). The broad market that most portfolios are designed to track must follow suit. It’s just math.

To repeat, dividend-paying stocks (XDV index down 6% 10% just today), preferred shares (-6% -8% today), REITs (-4% -6% today) and corporate bonds (losing, as well), along with the hundreds of mutual funds, ETFs and managers that hold them at every price, are a massive capital risk widely held in Canadian portfolios.

Now is not a time to panic nor freeze.  Sober financial review and risk-management are critical to surviving and thriving through full market cycles. (See:  It’s time to put mindfulness back in financial planning).  It’s not too late to be proactive in your fate.

Danielle Park March 10th, 2020

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