Employment data will be the most important series to follow in the next few months as the economy first craters, then recovers.
Initially, this will be a bleak task. The Report on Business’s David Parkinson has already noted that 500,000 Canadians filed for unemployment insurance last week compared with 27,000 for the same week in 2019.
In the U.S., weekly jobless claims will be announced Thursday. The Calculated Risk financial site wrote, “Based on early reporting from various states, initial weekly claims will probably be several million this week … The all time high for initial weekly unemployment claims, Seasonally Adjusted, was 695,000 in Oct 82…. [That] record will be obliterated this week due to the sudden economic stop.”
To supplement weekly employment reports, TD economists Robert Both and Andrew Kelvin are publishing “Canada Social Distancing Tracker,” which attempts to measure the domestic economy in real time. It will be available to TD clients weekly.
The report uses public transit usage, street traffic data compared with historical averages, movie ticket sales, and restaurant bookings in major cities (no need to check the latter at the moment – they are down 100 per cent ) to track consumer and business activity on a nearly hour to hour basis.
I found the street traffic chart interesting enough to post on social media. The bad news is that current traffic levels are a mere fraction of usual levels – a negative indicator for current economic activity levels. The good news is that the data should provide a reliable signal when the economy begins to recover.
-- Scott Barlow, Globe and Mail market strategist
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The Rundown
Quality companies are going to survive this market turmoil. Here are the sectors and stocks to target
The crisis will eventually end. What investors need to do now is avoid what one reader calls “The baby with the bathwater syndrome.” In other words, don’t sell stocks of sound companies that are going to survive, no matter what happens. Hold on to them, collect dividends, and, if you have some cash put aside, buy them while they’re cheap. Gordon Pape tells us where to look.
Gold’s safe haven status takes coronavirus hit
Is gold’s current pullback just a blip on the way to higher prices as fears over the economic impact of the coronavirus will drive renewed buying, or is it a sign the precious metal isn’t quite the safe haven it used to be? Clyde Russell takes a closer look.
Rob Carrick’s 2020 ETF Buyer’s Guide: Canadian Dividend ETFs
The fifth instalment of the Globe and Mail ETF Buyer’s Guide turned out to be a stress test for exchange-traded funds holding Canadian dividend-paying stocks. It did not go well. Read the guide here.
Others (for subscribers)
The highest yielding stocks on the TSX, plus risk data
Monday’s analyst upgrades and downgrades
Monday’s Insider Report: CEOs are investing millions in these large-cap dividend stocks
Others (for everyone)
Stay-at-home stocks rise from Wall Street’s coronavirus rubble
Hedge funds look for new ways to make money as coronavirus wreaks havoc on markets
Ask Globe Investor
Question: I’m looking at my portfolio and, like everybody else, I see a lot of red. Tell me what is wrong with the following: If I sell everything where I have a loss and then buy it back immediately I would be in the same position but I would have all those losses which I could apply to future gains for tax purposes over the next many years.
Answer: Unfortunately, it doesn’t work that way.
If you sell a stock for a loss and immediately repurchase it, this is called a “superficial loss” and you cannot use it to offset capital gains. The same is true if you sell the stock and an affiliated person – such as your spouse or a company controlled by you or your spouse – repurchases the same stock.
For the capital loss to be allowed by the Canada Revenue Agency, you must wait at least 30 days before repurchasing the security. The restriction also applies to the 30 days before the sale, which means you can’t get around the superficial-loss rule by purchasing additional shares before selling your existing shares at a loss.
Given that stock prices have been exceptionally volatile during the novel coronavirus pandemic, I believe it would be a mistake – unless you really need the cash – to sell your stocks at a loss and wait 30 days before repurchasing them. It’s possible that stocks could fall further in that time, but it’s also possible that share prices could rebound, possibly strongly, if evidence emerges that the coronavirus is peaking or that certain drugs are effective in reversing serious illness in COVID-19 patients.
Imagine how you would feel if you sold a stock for the tax loss, only to watch it climb 30 per cent, 50 per cent or more while you waited to repurchase it. The benefit of the tax loss would be far outweighed by the lost opportunity to share in the stock’s recovery.
There is, however, at least one strategy that investors can use to lock in a tax loss while still participating in a potential market rebound. Although you are not permitted to repurchase an identical security within 30 days, you are allowed to buy a similar stock and still claim the tax loss on the shares you sold. For example, if you sell shares of Bank of Montreal for a capital loss, you could immediately purchase shares of Royal Bank. That way, if bank stocks rebound, you’ll participate in the gain. Another option is to sell a stock for a loss and then purchase an exchange-traded fund that invests in the same sector..
At the end of the 30-day period, you could sell the newly acquired security and repurchase the original stock you sold for a loss. This would allow you to use the capital loss for tax purposes. Remember that capital losses must first be applied against capital gains in the current calendar year. Any capital losses left over can be carried back up to three years or forward indefinitely to offset capital gains in those years.
--John Heinzl
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What’s up in the days ahead
Jennifer Dowty has a Q&A with economist Luc Vallee from the Montreal Economic Institute, who will have some actionable investing advice at this critical moment in time.
Click here to see the Globe Investor earnings and economic news calendar.
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Compiled by Globe Investor Staff