March 16, 2020 Newsletter

Dear Friends,

Tangents: Happy Monday!

Another day on the roller coaster -do not worry, this ride will end some day soon.  Keep in mind that it is a medical crises, not a financial crises.
There are incredible buys right now – so many extremely undervalued businesses.  People are behaving irrationally.  Just think for a moment of the businesses with great balance sheets and terrific free cash flows that will survive and some that will even thrive during this medical crises.  Amazon hired 100,000 new workers today to keep up with the demand.  Of course e-commerce will escalate as people stay away from shopping centers and order everything that they can on-line.  Yet in spite of a solid balance sheet showing top line revenue growing at double digits, US $55 billion in the bank and ~US$22 billion of free cash flow, panicked investors knocked $95.85 US off Amazon’s share price today!  Analysts’ consensus estimates is a 12-month share price target for Amazon +43% higher than where the shares closed today.

Fifteen years ago, the market closes from my nightly Newsletter were the following:

Since then, we’ve had the global financial crises of 2008, the Ebola outbreak, H1N1, any number of other downward triggers I could cite, yet still the NASDAQ closed at 6904.594 today, +243% higher than it did 15 years ago, or +16.2%/annum on annualized basis.  All the other indices are also substantially higher than they were fifteen years ago.
The Federal Reserve slashed interest rates by 1% last night and they could be down to zero by Wednesday.  The Bank of Canada lowered rates half a percentage point on Friday and they will probably drop to zero here as well.
My thoughts are with everyone at this strange time, as routines pause and we adjust to living in a new way for the health of communities across the world.  
We need to find peace and beauty and harmony in our lives right now. 
In search of those very things, Gary and I went to Butchart Gardens last Saturday to see if the spring flowers were blooming.  Butchart has a Spring Prelude Special on until the end of the month that includes entry fee and a two-course lunch. 

We will survive
Gloria Gaynor has recast her heartbreak anthem in the name of prevention, encouraging people to properly wash their hands for at least 20 seconds while belting out her classic tune. If disco isn’t your thing, here are more songs from across the decades that can help you curb germs while you rock. (Click to jam — and scrub.)-CNN.

PHOTOS OF THE DAY

The Connemara Mountains on the west coast of Ireland which have been transformed, in celebration of St. Patrick’s Day, by Finnish artist Kari Kola into the ‘worlds largest outdoor light artwork’ called savage beauty.
CREDIT: CHRISTOPHER LUND

Alberta (45699 Galatea in disguise) Passing over Dent Head Viaduct in the Yorkshire Dales. The London Midland and Scottish Railway (LMS) Jubilee Class is a class of steam locomotive designed for main line passenger work. 191 locomotives were built between 1934 and 1936.They were built concurrently with the LMS stanier Class 5 4-6-0.
CREDIT: CHARLOTTE GRAHAM FOR THE TELEGRAPH

Wildfires burn on the slopes around Table Mountain, as seen from Camps Bay. Wildfires in Capetown, South Africa.
CREDIT: SHUTTERSTOCK

Airplanes are parked on a runway at the airport in Frankfurt, Germany, Sunday. Due to the coronavirus, Lufthansa had to cancel half of its flights.
CREDIT: AP PHOTO/MICHAEL PROBST

Market Closes for March 16^th ,2020 

International Markets

Bonds

Currencies

Commodities

Market Commentary:
On this day in 2000, as investors began “rotating” out of the internet and into the Old Economy, the Dow Jones Industrial Average surged a record 499.19 points, putting the index up 8.35% for the previous two days. For the first time ever, investors turned over more than 500 million shares just in the first hour of New York Stock Exchange trading. “Things that used to take weeks to happen now happen in days,” marveled Bill Schneider, head trader at Warburg Dillon Read.
Canada
By Michael Bellusci
(Bloomberg) — Canadian stocks plunged about 10% as measures to curb the spread of the coronavirus only intensified concerns the economy is heading into a recession. Prime Minister Justin Trudeau said the government will restrict the entry of all non-residents into Canada except Americans, while U.S. President Donald Trump urged social distancing and schools and restaurant services across North American will shut down to fight the pandemic. The S&P/TSX Composite Index dropped 9.9% to the lowest level since February, 2016, bringing its losses to 31% from the Feb. 20 peak.  Ten of eleven sectors fell on the Canada benchmark, while materials closed in the green. Air Canada, shares fell 28% today alone on the government travel ban and is now down 62% this year. Dramatic rate cuts from global central banks, including the Fed on Sunday and the Bank of Canada on Friday, appear to have done little to calm investors who see global growth virtually grinding to a halt.
     Royal Bank of Canada was the first to cut its prime rate to 2.95% from 3.45%, matching the Canadian central bank’s cut. Oil’s spectacular collapse deepened, with West Texas Intermediate futures settling under $29 per barrel in New York as widening global efforts to fight the spread of the coronavirus looked set to trigger the most severe contraction in annual demand in history. Gold  extended losses after its worst week in almost four decades, with investors “selling whatever they can” as the widening economic impact of the coronavirus spurred panic across markets. Gold and silver equities however, defied slumps in their respective commodities, led by a jump in levered ETFs, which saw massive weakness and volatility last week. The Bank of Canada will likely take the overnight rate to 0.25% from 0.75% ahead of the next scheduled decision on April 15, according economists from Bloomberg Intelligence. Given the extent of pandemic-driven unknowns, the central bank may want to pull a page from the Fed’s emergency playbook and jettison the forecasting exercise over the near term. Andrew Husby, Bloomberg Economics
“We continue to recommend investors refrain from buying the dips, and carrying above-average exposure to gold equities, even amid recent weakness in the commodity,” Canadian Imperial Bank of Commerce portfolio strategists including Ian de Verteuil wrote in a note to clients early Monday. CIBC is among banks calling for a recession this year domestically along with in the United States. Royal Bank of Canada thinks the country will fall into a recession this year after taking a double hit from falling oil prices and the global impact of coronavirus on economic activity. Meanwhile, Bank of America said Friday Canada will experience negative GDP growth during the second and third quarters of this year. The numbers of shares traded on the benchmark S&P/TSX last week hit its highest level since at least 1985, when Bloomberg started compiling data.
–With assistance from Aoyon Ashraf and Divya Balji.
US
By Jeremy Herron and Vildana Hajric
(Bloomberg) — The stomach-turning ride on global financial markets took a dramatic turn Monday, with U.S. stocks plunging the most since 1987 after President Donald Trump warned the economic disruption from the virus could last into summer. The S&P 500 sank 12%, extending losses as Trump spoke said the economy could fall into a recession. Equities opened sharply lower after central bank stimulus around the world failed to mollify investors worried about the damage the coronavirus is inflicting on economies. The negative superlatives for American stocks are piling up. The S&P wiped out its gain in 2019 and is now down almost 30% from its all-time high. The Dow Jones Industrial Average lost almost 13%, falling 3,000 points to close at two-year low. The Russell 2000 had its worst day on record, losing more than 14%.
“This is different. The thing that is scarier about it is you’ve never been in a scenario where you shut down the entire economy,” said Steve Chiavarone, a portfolio manager with Federated Investors. “You get a sense in your stomach that we don’t know how to price this and that markets could fall more.” While the Fed cut rates toward zero and stepped up bond buying, investors continued to clamor for a massive spending package to offset the pain from closures of schools, restaurants, cinemas and sporting events. Companies around the world have scaled back activity to accommodate government demands to limit social interaction

Here are some of Monday’s key moves across major assets:
* All 11 groups in the S&P 500 fell, with eight of them down at least 10%.
* The Dow Jones Industrial Average’s tumble from its record reached 30%.
* Brent crude dipped below $30 a barrel for the first time since 2016.
* Treasury yields retreated across the curve with moves mostpronounced on the short end.
* Shares tumbled in Asia and Europe, where the continent is now reporting more new virus cases each day than China did at its peak as more countries lock down.
* The yen surged, the Swiss franc rallied and the dollar fluctuated.
* Gold failed again to capitalize on the rush to havens and reversed an earlier gain to tumble.
* Bonds declined across most of Europe, where a measure of market stress hit levels not seen since the 2011-2012 euro crisis.

     The Fed and other central banks have dramatically stepped up efforts to stabilize capital markets and liquidity, yet the moves have so far failed to boost sentiment or improve the rapidly deteriorating global economic outlook. An International Monetary Fund pledge to mobilize its $1 trillion lending capacity also had little impact in markets. The problem is, bad news keeps stacking up. The New York Fed’s regional gauge of factory activity plunged. Ryanair Holdings Plc said Monday it will ground most of its European aircraft while a consultant said the pandemic will bankrupt most airlines worldwide before June unless governments and the industry step in. Nike Inc. and Apple Inc. announced mass store closings.
“In normal circumstances, a large policy response like this would put a floor under risk assets and support a recovery,” Jason Daw, a strategist at Societe Generale SA in Singapore, wrote in a note. “However, the size of the growth shock is becoming exponential and markets are rightfully questioning what else monetary policy can do and discounting its effectiveness in mitigating coronavirus-induced downside risks. ”The yen rebounded from Friday’s plunge after the Fed and five counterparts said they would deploy foreign-exchange swap lines. Australian equities fell almost 10%, the most since 1992,even after the Reserve Bank of Australia said it stood ready to buy bonds for the first time — an announcement that sent yields tumbling. New Zealand’s currency slumped after an emergency rate cut by the country’s central bank. Meanwhile, China reported Monday that output and retail sales tumbled in the past two months.
These are the main moves in markets:
Stocks
* The S&P 500 fell 11.98% as of 4 p.m. in New York.
* The Dow Jones Industrial Average plunged 12.93%
* The Stoxx Europe 600 Index lost 4.9%, paring a drop that reached 10%.
* The MSCI Emerging Market Index declined 6.3%.
* The MSCI Asia Pacific Index decreased 3.7%.
Currencies
* The Bloomberg Dollar Spot Index rose 0.2%.
* The euro gained 0.5% to $1.1162.
* The Japanese yen strengthened 1.8% to 105.94 per dollar.
Bonds
* The yield on two-year Treasuries sank 14 basis points to 0.35%.
* The yield on 10-year Treasuries declined 22 basis points to 0.73%.
* The yield on 30-year Treasuries declined 22 basis points to 1.31%.
* Germany’s 10-year yield climbed seven basis points to -0.47%.
Commodities
* West Texas Intermediate crude fell 9.2% to $29.05 a barrel.
* Gold weakened 4.3% to $1,463.30 an ounce.
* Iron ore sank 2.5% to $86.10 per metric ton.

–With assistance from Claire Ballentine, Elena Popina and Elizabeth Stanton.

Have a great night.

Be magnificent!
As ever,

Carolann

Optimism is the faith that leads to achievement.  Nothing can
be done without hope and confidence. -Helen Keller,1880-1968

Carolann Steinhoff, B.Sc., CFP®, CIM, CIWM
Senior Investment Advisor

Queensbury Securities Inc.,
St. Andrew’s Square,
Suite 340A, 730 View St.,
Victoria, B.C. V8W 3Y7