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Most investors knew there was a recession coming at some point but nobody expected this.

The heart-attack metaphor was used a lot to describe what happened in 2008 after money stopped flowing in the banking circulatory system. The comparison works here too, only in a much different way. This time, it’s the physical flow of people through a consumer-based economy that has abruptly stalled.

The economic dislocations in major Canadian cities are already extensive. Grocery-store and drug-store workers, for example, are among a minority of financially vulnerable services workers who can be confident about making rent or mortgage payments in the next few months.

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The transportation industry is facing an existential crisis. An Australian consultancy predicted that a majority of global airlines will be bankrupt by the end of May without government assistance.

Investing-wise, I’m paying less attention to equities than usual at the moment. Goldman Sachs U.S. equity strategist David Kostin used a number of pricing models to estimate that the S&P 500 should bottom near the 2000 levels – about 20 per cent lower than now. (check this is still true at end of day). But he added, “event-driven bear markets are usually followed by sharp rebounds, and we still expect the S&P 500 will end 2020 at 3200(+18%)” .

There is a very real sense in which the extent of the equity market decline in the coming months – the economic data in North America is almost certain to be horrendous – will be followed by an equally powerful rally later. I might try and pick up some bargains at some point – high quality balance sheets in sectors like health care and consumer staples only - but I’m not about to waste much time trying to time the market.

The potential for credit market upheavals is a more serious proposition than temporary equity declines.

Citi credit strategist Matt King highlighted the risks in a Monday research report: “Much of the problem is that credit and cashflow streams form long and tangled chains which are only as strong as their weakest link. It is fine to propose sick pay and a mortgage holiday – but what about those businesses and households which depended on earning rent? What about car leasing and credit card payments? What about the over-levered [leveraged buyout company] which needs to pay its coupons?”

Central banks are doing their part by slashing interest rates and governments are enacting fiscal measures to alleviate financial pain. The sheer scale of the economic upheaval, however, and the speed that it’s spreading, means that payment defaults of all sizes are likely.

I don’t know what’s going to happen in the next three months and strongly suspect that anyone who says they do is lying. How governments handle large scale payment defaults on corporate debt will be key; how to support tens of thousands of small businesses faced with no customers is another major issue.

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Politics will play a big role in financial support. The energy sector, for instance, is in dire need of help but because oil producers are massively unpopular with the environmental movement, the politics are problematic on both sides of the border.

The bank bailouts during the financial crisis also left a complicated political aftermath – the broad sense that governments paid off the bank executives that caused the crisis and left the average citizen to fend for themselves. It’s likely that fiscal support this time will be more populist in design.

It’s a mess, there’s no question - a bigger one than I expected only 11 years after a financial crisis that was allegedly a ‘once in a generation’ event. The only good news is that experts believe the pandemic is a temporary calamity and will be contained by midsummer. The only question is how much damage can be done in a few short months.

-- Scott Barlow, Globe and Mail market strategist

This is the Globe Investor newsletter, published three times each week. If someone has forwarded this e-mail newsletter to you or you’re reading this on the web, you can sign up for the newsletter and others on our newsletter signup page.

Stocks to ponder

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Fortis Inc. The bottom has fallen out of the stock market in three short weeks, economists are convinced that a nasty recession is approaching, everything from professional basketball games to the Boston Marathon have been put on ice – so should you be looking for buying opportunities? At the very least, you should be aware that this remarkable sell-off has ensnared several bullet-proof stocks that are ideally positioned to cruise through this unprecedented turmoil relatively unscathed. Fortis Inc. is one of them. David Berman shares his views.

The Rundown

Negative interest rates could now be coming to Canada. Three investments to prepare for it

We may be closer to zero interest rates than most people think. The entire U.S. Treasury bond yield curve dropped below 1 per cent last week for the first time in history. Gordon Pape shares his views on the subject, including investments to prepare for it.

What investors should do now in the face of so much uncertainty

Despite Friday’s big rally, the longest bull market in history ended last week, almost 11 years to the day from its start. The plunge has shocked investors, coming less than a month after the major U.S. indexes hit record highs. We’re now in bear market territory for the first time since the financial crisis. The main questions are how low the markets will go and how long this will last. Gordon Pape explains what he thinks investors should do now.

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Valuations come down to earth as sudden bear market shifts stock market outlook for the next decade

Emotions are running high and the market’s composure is fragile, with the human and financial toll of the coronavirus outbreak currently unbounded. There is at least a faint silver lining on the other side of this crisis – a reset of what might be expected out of financial markets in years ahead.​ Tim Shufelt reports

Plunging interest rates throw wrench in retirement plans for individuals, pension plans

The novel coronavirus is targeting your retirement. Granted, that is unlikely to be your biggest concern right now, as schools close and hospitals brace for a potential influx of new patients. But when the current pandemic eases – and it will – the conventional wisdom on retirement planning may be numbered among its victims. Ian McGugan explains.

Others (for subscribers)

Monday’s analyst upgrades and downgrades

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CIBC CEO bets big on recovery

U.S. markets should stay open despite turmoil, says top securities regulator

Coronavirus combined with zero interest rates ‘really worries me,’ Bridgewater’s Dalio says

Haven assets losing their mojo in virus-stricken market

Others (for everyone)

After Trump boasts about rally, Wall Street tanks again

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U.S. treasury liquidity better but working from home slows down market

Globe Advisor

Six dividend-paying stocks to help ease the pain

Are you a financial advisor? Register for Globe Advisor (www.globeadvisor.com) for free daily and weekly newsletters, in-depth industry coverage and analysis, and access to ProStation - a powerful tool to help you manage your clients’’ portfolios.

Ask Globe Investor

Question: I am 52 and have about $200,000 in RRSPs. I pay a company to take care of them. Last year and the year before, my return on investment was 2.9 per cent. I pay them 1 per cent. Should I have done better?

Answer: I assume the 2.9 per cent is your compound annual growth rate over 2018 and 2019, after the management fee is deducted. If that is the case, you actually did slightly better than the TSX.

The S&P/TSX Composite Index was down 11.64 per cent in 2018. It rebounded to a gain of 19.13 per cent in 2019. If you average what happened to a TSX investment from the start of 2018 to the end of 2019, the compound annual growth rate is 2.6 per cent. By that measure, your 2.9 per cent doesn’t look too bad.

Of course, you would have done a lot better if some of your assets were in U.S. equities. If you are mainly invested in Canada, you should discuss other options with your adviser.

--Gordon Pape

Do you have a question for Globe Investor? Send it our way via this form. Questions and answers will be edited for length.

What’s up in the days ahead

Go to globeinvestor.com for the latest coverage on the market crisis.

Click here to see the Globe Investor earnings and economic news calendar.

More Globe Investor coverage

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Click here share your view of our newsletter and give us your suggestions.

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Compiled by Globe Investor Staff

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