Watch GLC’s Chief Investment Strategist, Brent Joyce, speak with host Greg Bonnell on Business News Network (BNN) TV’s “Bloomberg Markets” show.
Video Description: Two men talk to one another in a TV studio
Greg: markets have been on a wild ride, concerns over the economic impact of the coronavirus mounts and central banks taking a hatchet to rate.Brent Joyce is chief investment strategist at glc asset management, and he joins us now. Good to see you, Brent.
Brent: good afternoon, Greg.
Greg: This is one of those environments where I think investors really have a tough time knowing how to play things. I'm thinking particularly last week when -- well, often what we do in times of stress, we seek havens, maybe we go into defensive stocks, everything was selling off. How do you navigate times like that. And the fact that we could see times like that ahead.
Brent: It's about controlling emotions for the average investor. That's certainly our belief making sure that you're properly balanced, right, managing your risk tolerance, your time horizon. Lots of these tenets of financial planning that when markets were roaring through the fall and earlier this year people maybe got a little bit away from those. This is a wake-up call for sure.
Greg: I was thinking about that last year and the big gains we saw, and someone said what did I go into a balanced portfolio and I got my 7 or or 8%, I could have just bought an ETF that tracked the S&P 500 and been up more than 20%, but then it's times like these that remind us this is why we try to protect ourselves.
Brent: Yeah, and what we saw last week was, you know, the only safe that was out there really was cash and sovereign fixed income. You know, the highest quality bonds that have been hard to love, you know, for a number of months. Gold disappointed folks. U.S. dollar typically a safe haven disappointed folks, so it was the bread and butter that came through, and that's what you get in a balanced portfolio, is for times like this.
Greg: obviously when we saw the u.s. ten year yield crack below 1% tomorrow -- yesterday. Can't predict what's going to happen. It's still down there right now. We knew it was awfully hard to get yield in the bond space. My god, the 10-year below 1%. And the equity space, this is basically just telling you as you hunt for yield, you're not going to get in the U.S. 10-year, but look at this, the ratio and what they are expecting. Clearly if you're looking for yield, you're looking into the equity space, but obviously that's a bit of a riskier play for investors, particularly if you're getting closer to the end of your working life.
Brent: That's true, and certainly people need to be cognizant of their time horizon. When you look at a chart like that, to me it's sort of reminiscent of the fact that bonds have been selling off here and bonds have been pricing in, yields have been falling, sorry, have been pricing in this virus for a lot longer than stocks have been. Like February 19 we still had new all-time highs. There was a lot more fear in the bond market than in the equity market, but I can remember Tina, right, there is no alternative. So that's pushing folks into risk assets, and that really is a bit of a narrative we think about where we might be six months or nine months or a year from now, if we have the stimulus that's being pumped, the rate cuts that have come through, those lingers effects are still going to be coursing through the economy, and if the fear has dissipated, then we could be setting ourselves up for later this year, early into next year, a return to normalcy, perhaps. I think that's what central banks are trying to comfort folks with. They know and said explicitly yesterday that rate cuts don't cure any virus, but it can help to set the stage for a recovery or some foundation as the fear starts to retreat, and we're in days of, you know,pretty high fear and high panic at the moment.
Greg: And so clearly then think of the long-term horizon. Everyone has a different horizon based on where they are in their working life and what they are trying to achieve through their portfolio mix and returns, but at the same time, there will be a point when the coronavirus will be, oh, okay, I remember having to work through that, as I can remember I was in the more news side instead of the business side during H1N1. We will continue to live through these experiences and they will get behind us.Brent: Something we have been sharing with folks is when we look at the long list of historical precedent around not just health scares, whether it's been geopolitical flare-ups, equity markets can take a hit. We've hit a whiteout in terms of data, but that will clear, and it's the emotions that are taking over when we have these big swings Friday, yesterday, today on both sides, positive and negative. It's a dangerous environment for investors to be tinkering, I think. You really have to stick to a solid foundation, a solid plan that you had, and for those who have been in balanced funds- I think they are sleeping a lot better today than others perhaps.
Greg: When you say tinkering, it makes me think of some people say I've been watching a name for a while, I think it's a buying opportunity. With this kind of volatility, is it still a little premature to say now I'm just going to back up the truck and load up what I always wanted to buy?
Brent: It comes back to your temperament as an investor. If you're going to buy a cruise line or airline and wait to see what's going to happen two or three years from now, that might have some credibility to it. For most folks I think it is sticking to the bread and butter and just waiting to see a little bit of clarity here. I think we're going to have volatility for a while as this is more of a process. It's got to work its way through. One of the things to keep in mind is from such lofty levels that we are coming with equities. So as much as markets correct and 10, 12% seems like big numbers, you know, we've only gone back three, four months from where particularly in U.S. markets. So there's been some damage, and again the bond market is reflecting more pessimism than equities are than equities are today I would say.
Greg: Thanks for walking through the interesting moves with us.
Brent speaks to the market reactions to the coronavirus outbreak, including how markets are responding to the recent central bank actions. Bottom line: it’s not time to panic.
As Chief Investment Strategist, Brent is responsible for forming and communicating GLC’s investment outlook. Brent provides insight into current market and economic conditions for clients and investment partners across Canada. Brent’s work in capital market research and economic cycle analysis has been instrumental in developing GLC’s proprietary economic scorecard and model-informed investment process for GLC’s Global Multi-Asset Strategy team. As co-chair of the team, Brent plays a leadership role in formulating asset mix decisions across all of GLC’s balanced and asset allocation mandates.
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This commentary represents GLC’s views at the date of publication, which are subject to change without notice. Furthermore, there can be no assurance that any trends described in this material will continue or that forecasts will occur; economic and market conditions change frequently. This commentary is intended as a general source of information and is not intended to be a solicitation to buy or sell specific investments, nor tax or legal advice. Before making any investment decision, prospective investors should carefully review the relevant offering documents and seek input from their advisor.