Investment Q&A

Q: I understand that the market is forward-looking. What has been difficult for me to ascertain, especially in these tumultuous times, is how forward-looking they are. I realize no one knows the future so we all have to decide for ourselves how long we think COVID19 will continue to roil the markets. But is there any way to know (guestimate) how far out the market currently thinks this will last? For example, I am writing this question on Sunday and wondering how the markets will react come Monday. Personally, I feel the increase in cases and apparent disarray in the leadership in the US is unfolding as I anticipated it would. Would a steep downturn in the markets Monday morning suggest analysts had it wrong or would it not really tell us much regarding the anticipated future? I guess I am looking for an indicator like the percentage chance that is assigned as to whether or not the Fed will change interest rates. Don't know where that percentage comes from but it always seems rather accurate.

Appreciate your insight and for your wisdom. It's helping me to keep off the proverbial ledge!

Paul F.

Q: Hello Peter
Has the covid 19 fully or near fully priced in the market? I look at the log graphs for new cases and deaths and it is still on the rise.
Is the market in North America forming a base or is there another sharp leg down coming? What is your opinion?
Regards.

Q: RE: Bank of Canada announcement about the secondary market purchases of Government of Canada securities.

What's your opinion about this?

"The effective start date is 1 April 2020. Program details are as follows:

Purchases will begin with a minimum of $5 billion per week across the yield curve. The program will be adjusted as conditions warrant but will continue until the economic recovery is well underway.
Operations will be conducted daily.
The operations will be cash purchases conducted via reverse auctions.
Following the launch of this program, the Bank will discontinue the Government’s repurchase operations (both cash and switch buybacks) and cash management bond buyback operations done as fiscal agent. The Bank`s secondary market purchases will provide significant support to the liquidity and efficiency of the government bond market, reducing the need for these fiscal agent operations."

Q: Last year I took a sizeable position in VEE as one of the main parts of my foreign diversification. It has, like so much else, dropped a lot. I am wondering if the prospects for recovery in the emerging markets are not as favourable as the potential in the US or Canada, where economic resources (or the ability to backstop printed money) are stronger. As such, I am inclined to sell this position (and as you point out, harvest a tax loss) and migrate to some North America holding(s). Your comments, pls. Thanks for your excellent service.

Q: Will the massive stimulus packages being added by governments negatively affect market health over the long term and how will this affect bank stocks?

Q: Hi guys,

Thanks for your valuable advice.

I am trying to process the wild swings going on and the lagging advice coming out through business news channels. With the new upswing in the markets, everyone is now proposing what we should have bought (and could still do). This is frustrating as it was good advice a week ago, and things will surely change again.

While we all understand that there is no crystal ball, what do you feel are likely scenarios for markets as investors process central bank and legislator market stimulants?
It appears that investment strategy is now heavily influenced by what has dropped, in combination with highly likely to be supported by government as critical assets.
If you could suggest any further insight in future direction or departures from recent strategy, and whether you feel that the government interventions are likely to hold us at a V shaped market curve, that would be helpful.

Thanks,

Peter

Q: Hi 5I,

In your blog on markets specifically the S&P 500 you state: "If we go back to 1990, the average trailing P/E ratio for the S&P 500 is 19.9. Currently, the P/E ratio is 19.3. Over the last five years, the P/E ratio has averaged 21.5. Looking at forward P/E ratios, the S&P 500 has averaged 15.8 and is currently sitting at 17.6."

My question is what do see for earnings based on current market conditions ? If in the last recession in 2008-9 we saw earnings drop by 50% then how much more can this index drop? The low for the S&P 500 was approx 780 back then, and if makers the same assumptions then we could get to around 1500 to 1800.

Thanks,
Chris M.

Q: While our politicians and others say this is unprecedented, the truth is it has happened before. The 1918 Spanish Flu killed 33 million world wide because they didn't know much about prevention and soldiers were returning from war. Some areas did close borders and practice self-isolation. Even the word quarantine comes from the 40 day isolation period in the middle ages. What happened after 1918?
Markets improved, then there was the 1920-21 depression (maybe war related) followed by one of the biggest bull markets ending in the 1929 Great Depression.

We haven't used the word depression yet but a depression is a fall in GDP of 10% or more or a Recession lasting more than 2 years. I think it is likely that we will have a technical "Depression" and using the word may send markets lower. Either way we are not finished and we need to test the lows and see some real light at the end of the tunnel. But it will end and return to normal and higher prices. My thoughts as I sit in self isolation. Stay safe everyone.

Q: 3 days up in a row. Should we be buying?

Q: Hello All,
Why would stocks raise just because of the stimulus.
The Streets are empty and companies are laying off people or are closed. No production, no income, only stimulus money from governments which is not backed. There will no quarterly earnings now and for the second and perhaps 3rd quarter!
Why is the market bull crazy, doesn't make sense.
Thank you, Frank

Q: Hi Peter, VCN and XAW are in one portfolio, VXC is in another. Would you add to these or is there a better choice considering the Canadian dollar or Covid? Thanks.

Q: With what appears to be both Canada and the US now passing massive stimulus packages, would you consider now a good time to start taking some positions on companies while they are down? Or do you think there is still room to bottom out in 2-3 weeks when the virus starts to hit us (and the US) like it has Italy and other places?

Thanks!

Q: Hi there,

The market has rallied hard over the last 3 trading days. Still it is far off from the all the highs when looking back. In your professional experience and years of investment experience, can you comment on where you think the market goes from here? Do you think this is a head fake / bull trap and we are heading lower in the coming months and there will be better entry points over the next 6 months? I've heard more people say U shaped recovery, and a couple saying V shaped. What is your positioning on this? It would great to hear your perspective on the current market and where it might go over the next 12 months.

Thanks!

Q: Does this have the look of a bear market rally or a sustained push higher. Stocks have moved really quickly off the lows...it seems overdone in the short-term given remaining headline risks and possible future waves of the virus? Hard to determine, but what are your expert opinions?

Thanks,
Jason

Q: Looks like the markets are liking the financial aid packages approved in the last day or two but do you think that this bounce is warranted? Would you start deploying cash here in both the Canadian and US markets or wait for less volatility? What does your experience tell you? Thanks.

Q: During this downturn in the market I believe 5i said it could be a V recovery. At the rate we are going we should be back to normal very shortly. I read 5i questions and write a lot of answers pertaining to me over the years. Do you see this recovery going at this rate or will there be a noticeable pullback? Thanks Dennis I really rely on your service

Q: What is the one stock you would suggest to go all in with this correction?

Q: Re: Article appearing today. I have never agreed with David Rosenberg. This time I think he might be right. What would you place the odds of his view of the market proving correct?

Q: I know currency's are very difficult to forecast. However, I will ask this question anyway.
With the CDN $ hovering around $.068 do you recommend taking hedges off or leaving them on ?

Q: I'm thinking of switching etf's, selling VGG and buying VSP to take advantage of tax loss selling (VGG) and also buying into a CAN dollar hedged fund as the CAN dollar has taken a beating lately and should rebound looking forward, appreciate your professional opinion? Thank you!