Terry Tang, Investment Advisor
April 30, 2020
Dear Private Client,
In March, we witnessed the worst stock market selloff since the financial crisis 12 years ago, driven by fear and uncertainties surrounding COVID-19 and reckless trading activities. At that time, I have pointed out steep selloffs are often followed by sharp rebound.
I have also reminded investors on numerous occasions the importance of staying in the market and avoiding missing out the rebound - and the strategy pays off. The S&P 500 Index surged 12.8% and TSX Composite Index gained 10.5% in April, the best month in 33 years, flirting with the idea that the worst may be over. Despite the rebound, volatility will endure in following weeks but there are still bargains to be had in the stock market for long-term investors.
Bank Dividends Intact
As I have mentioned previously, U.S and Canadian banks have all signaled that they have no plans to cancel or suspend dividend payments as a result of the pandemic. Canadian banks, in particular, acknowledge that investors rely on dividend income, and these cash flows become increasingly important at the time of economic impact. These comments came after European banks such as HSBC and Standard Chartered have all cancelled their dividends and buybacks for 2020, after being urged by the regulators to do so. Our clients' portfolios do not hold shares of European banks.
Pressure on REITs
The pandemic has hit retailers hard and REITs (Real Estate Investment Trust) even harder as rental collection has become a challenge. We have been paying close attention to our REIT holdings for quite some time. REITs have been a small portion of our clients’ portfolios and we only invest in large-size REITs - namely RioCan Real Estate Investment Trust (REI-UN) and AGNC Investment Corporation (AGNC), which have strong balance sheets and diversified portfolios of properties to weather the storm.
"I HAVE REMINDED INVESTORS ON NUMEROUS OCCASIONS THE IMPORTANTANCE OF STAYING IN THE MARKET AND AVOIDING MISSING THE REBOUND."
Tech stocks have made a huge comeback from the coronavirus. PayPal (PYPL), for example, a fintech giant is already trading at pre-crisis level. Uber (UBER) and Square (SQ) have rebounded nicely from their lows.
A health crisis requires a health solution, whether it’s the development of vaccines or herd immunity or flattening the curve or even a combination of those things. Fiscal stimulus helps alleviate the economic pain caused by social distancing and mandatory closures, but the crisis needs to be resolved before economic recovery takes place. Currently, there are at least 21 leading pharmaceutical companies that are rushing to develop vaccines to fight COVID-19. The progress has been promising.
Looking forward, our view has not been changed - the economy will be in a short and deep recession in the second quarter but expected to recover before the end of the year. Nevertheless, the economic impact of COVID-19 is an evolving situation and we will continue to monitor closely.
Stay safe, healthy, and informed.
The views and opinions expressed are those of the author and may not necessarily be those of Aligned Capital Partners Inc. The content is for informational purposes only and not meant to be personalized investment advice.
Disclaimer: Information contained in this publication has been compiled from sources believed to be reliable, but no representation or warranty, express or implied, is made by Terry Tang, ACPI or any other person as to its accuracy, completeness or correctness. All opinions expressed in this communication are as of the date of this publication, are subject to change without notice and are provided in good faith but without legal responsibility. Nothing in this publication constitutes legal, accounting or tax advice or individually tailored investment advice. This material is prepared for general circulation and has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. Products or services referenced may not be suitable for you and it is recommended that you consult your financial advisor if you are in doubt about the suitability of such investments or services. This is not an offer to sell or a solicitation of an offer to buy any securities. Investment products are provided through ACPI and include, but are not limited to, mutual funds, stocks, and bonds. All non-securities related business conducted by Terry Tang is not in his capacity as an agent of ACPI. Non-securities related business includes, without limitation, fee-based financial planning services; estate and tax planning; tax return preparation services; advising in or selling any type of insurance product; any type of mortgage service. Accordingly, ACPI is not providing and does not supervise any of the above noted activities and you should not rely on ACPI for any review of any non-securities services provided by Terry Tang. Past performance is not indicative of future performance, future returns are not guaranteed, and a loss of original capital may occur. Every province in Canada has their own laws regulating the types of securities and other investment products which may be offered to their residents, as well as the process for doing so. As a result, any securities discussed in this report may not be eligible for sale in some jurisdiction. No matter contained in this document may be reproduced or copied by any means without the prior consent of the author or ACPI.