The Top-Line
In the Macro
- The S&P 500 has officially doubled since its pandemic low – Staying invested pays off.
- The Canadian housing market is showing cracks – Is a correction in store?
In the Micro
- Retail sales in the US just dipped, leading to a market selloff – Should we be concerned?
The Bottom-Line
In the Macro
The S&P 500 has officially doubled since its pandemic low. Staying invested pays off.
Remember March 2020? Everyone was reeling. Governments were struggling with a once-in-a-century (hopefully) global pandemic. Mass shutdowns and economic activity ground to a major halt. And the stock markets dropped between 30-40% in what will be known as one of the sharpest pullbacks in history:
It was a month to remember, and many were expecting worse. Investors were running to safe havens and trying to protect what gains they had left after a 30-40% loss in a matter of weeks. However, those with some iron willpower and longer term views have been rewarded – as of August 16, markets are now sitting at levels around 100% higher than that traumatic date:
While the Canadian stock market has lagged, the returns are still impressive with over 80% of gains since March 23, 2020. It only took 354 total trading days to get to that 100% bounce for the S&P 500, the fastest doubling off a bear market bottom ever. On average, it takes about 1000 trading days.
The takeaway? Stick to your investment plan. Don’t let the short-term headlines or economic wall of worries get in the way of a successful strategy. You will be rewarded over time, but it is wise to remember that long-term gains are not without bumps along the way. There will be another correction at some point, but it is futile to predict when. The key is always to adjust your risk tolerance and objectives accordingly, then stay invested with that objective in mind.
The Canadian housing market is showing cracks. Is a correction in store?
Source: RBC
Housing markets in Canada have felt a similar trajectory, as you may have noticed on your most recent assessment. The pandemic has had many strange outcomes and is no more pronounced in how the housing market developed. As many opted to move from high-cost city dwellings to lower-cost more space rural living, prices skyrocketed amid a lack of supply. However, we’re starting to see some cracks in the system as of late, with average home prices dropping to $669,216 from $707,026, a decline of more than 5%.
Source: CBC
The main culprit is likely a lack of sellers amid other factors like affordability, new mortgage stress-test rules, and simply other things to do and spend on as the economy goes through reopening. While prices haven’t dropped dramatically, new listings and resales have – and a lack of sales data is likely under-reporting the real price drop.
Source: RBC
Housing has historically been seen as one of the safest investments you can make, and a great inflation-protected investment, something that is clearly in demand as goods and services prices are rising. However, it might be time to reconsider – Oxford Economists think Canada is the second riskiest property bubbles in the world. If you’re looking for some alternative investment options, our team can help you out.
In the Micro
Retail sales in the US just dipped, leading to a market selloff. Should we be concerned?
Source: Tradingeconomics
On August 17, we received an economic highlight that may have started a market consolidation – US retail sales. The number came in soft, losing 1.1% month over month versus expectations of only a 0.3% drop. 0.8% might not sound like a big number, but the implications are large. The US is a consumer-based economy, with consumer activity making up about two-thirds of all economic activity. This is why stimulus cheques to citizens have a strong positive effect on the economy; with more money in consumers’ hands, they tend to spend more and stimulate many sectors multiple times through. When numbers drop more sharply than expected in this indicator, concerns abound.
Retail sales are made up of purchases at stores, restaurants, and online. You would think as more people are comfortable going out, these would hold up – and if not, online sales would make up the difference. When you see the number come in this soft, you have to wonder if more are saving for that rainy day fund. This is a wise strategy, but the economy would struggle if too many hold back. And with this number confirming the lowest consumer confidence survey since April 2020, it will take some work to reverse these movements. A crucial thing to remember though is that a single data point is not a trend, and they must be monitored closely over the following few months to get an idea of where economies and markets might be heading.
As always, if you have any questions or would like to discuss further, please do not hesitate to reach out. Feel free to share with your friends and family too, as referrals are the best compliment we can receive.
