Richard Haass, president of the Council on Foreign Relations, penned “The Pandemic Will Accelerate History Rather Than Reshape It” for Foreign Affairs magazine in an attempt to predict the global political fallout of the pandemic. The article is well-considered, articulate, and contains some interesting guidance for investors. It also makes for really depressing reading.
Mr. Haas expects that the post-virus world will also be ‘post-American’. The lack of U.S. leadership internationally during the crisis due to political sclerosis, lack of will, and the fading respect for America globally, is the continuation of multi-year trends.
At the same time, anti-China sentiment is rising and international bodies like the World Health Organization have been ineffectual at best. The pandemic is being dealt with on national levels while hopes for global co-operation on issues like climate change fade. The author worries that nationalism, health fears and virus-caused developed world unemployment will erase the willingness of wealthier nations to accept refugees.
There are economic implications of Mr. Haass’ bleak projections – the potential dismantling of global supply chains and the resulting downward pressure on corporate profit margins is a big one – that investors with longer-term time horizons will have to take into account.
It is Mr. Haass’ thought process, however – the belief that the current crisis will accelerate trends already underway rather than abruptly remake daily life from scratch – that holds the most valuable information for investors.
When all this is over, I suspect many people will rush back to the office with a new appreciation for their co-workers. But the benefits and feasibility of working remotely have been more firmly established and management are now far more comfortable with the process. We’re likely to see a steady rise in employees working from home.
Remote employment will create investment opportunity, notably in the software, telecommunications, and casual wear sectors, and the same is true of online shopping, package delivery, video gaming, and other businesses that were already growing and got a boost from the crisis.
In the search for new investment ideas, Canadians should look at what they’re doing more of now during the crisis, whether that involves Netflix, working remotely, reading on a tablet, gaming or other. These are the trends likely to continue to strengthen when life returns to normal.
-- Scott Barlow, Globe and Mail market strategist
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Stocks to ponder
Nike Inc. The investment community is bracing for an ugly income statement at the athletic apparel retailer. But while the situation will probably get worse before it gets better, there is a contrary and bullish case to be made for Nike. Philip MacKellar of the Contra Guys newsletter shares his take.
The Rundown
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Last year, Norman Rothery looked at a model investor, called Balanced Bob. He retired at the peak in 2000 and by 2019 had already suffered from two big bear markets. His balanced portfolio was battered and bruised but it was still going. This year brought Bob his third bear market. As it happens, the S&P/TSX Composite Index recently dipped below its peak from 2000. It wiped out nearly 20 years worth of gains in the process, not including dividends and not adjusting for inflation. Norman takes a look at how Bob is holding up these days.
History says it’s time to get more patient. Here’s what one firm thinks investors should do
The pandemic-driven plunge in stocks is unique – other modern-day market crashes have been due to events in financial markets or the economy. But looking at those market downturns can still provide some sense of what lies ahead for the sort of investor who holds a balanced portfolio of stocks and bonds. Rob Carrick has some insight on the matter
Seniors who don’t need all of their RRIF money this year should consider this
Canadians are required to convert their registered retirement savings plans (RRSPs) into RRIFs by age 71 and are then mandated to withdraw a minimum amount each year. The minimum required withdrawal rate increases at each age – from 5.28 per cent at age 71, up to 20 per cent for those age 95 and older. The government’s response to the current COVID-19 crisis was to reduce the required minimum withdrawals by 25 per cent for 2020. There is, however, a way for older Canadians to work around the minimum withdrawal issue if they don’t need all of the money this year for living expenses - and it involves TFSAs. Actuary Bonnie-Jeanne MacDonald shares her thinking.
Others (for subscribers)
Wednesday’s analyst upgrades and downgrades
Tuesday’s analyst upgrades and downgrades
Wednesday’s Insider Report: A REIT yielding 11% that is under accumulation
Tuesday’s Insider Report: Two stocks seeing million dollar trades by board members
Number Cruncher: Ten consumer discretionary stocks set to benefit when demand begins to rebound
Top picks in the beaten down Canadian REIT sector
Others (for everyone)
U.S. companies criticized for cutting jobs rather than investor payouts
Investors await data on coronavirus drugs as market rally builds
Flood of dollars could sink greenback in coming years
Soaring unemployment increases odds U.S. banks will cut dividends
What’s up in the days ahead
One of Canada’s biggest fixed income investors sees an opportunity to grab equity-like returns with fixed income-like risks. David Berman will have all the details.
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Compiled by Globe Investor Staff