Wealth

Market Update: Coronavirus Concerns Ignite Global Equity Market Weakness

Global equity markets ended the month significantly lower in February 2020 followed by a dramatic plunge in early March, as investors woke up to the realization that the Coronavirus may have a greater impact on global economies than initially expected. 

The virus has already impacted global supply chains with the greatest number of infections in China, the world’s largest manufacturing hub. Now, as it spreads quickly around the world, investors are struggling to understand the extent to which the virus will slow global growth and output for 2020. That uncertainty has set the stage for a bear market.

To help make sense of this situation, we wanted to answer some questions you might have.

Has this happened before?

Yes. Bear markets, signalled by a market fall of 20% or more, are a normal part of the stock market cycle. According to CNBC, there have been 12 bear markets since WWII, (prior to this one) with markets falling 32.5% on average over 14.5 months, and taking two years to recover.

Historically speaking, there are more positive years than negative, and markets have always recovered and posted gains once again. The chart below shows a comparison between bull and bear markets on the S&P 500 Index. Bull markets (in green) tend to follow bears (in red), and have historically lasted much longer and had a much greater impact on market value. 

Source: Invesco

What do we expect to happen next?

To understand where the markets go from here, we’ll be watching how quickly and what type of stimulus governments and central banks implement in the coming weeks and months to counter the negative effects of slowing economic growth. 

Encouragingly, both Canada and the US have already introduced rate cuts, since the initial market drop. These types of low interest environments have historically been effective at stimulating demand during slowing economic times, according to research from Brookings.

How is this impacting WealthBar portfolios?

WealthBar portfolios are diversified by design to help you take advantage of growth when the market is up, and minimize losses when the market is down. That’s reflected in our recent performance. 

According to Morningstar data, as of the market close on March 11, 2020, the S&P/TSX Composite Total Return Index had fallen 20.21.% since February 20, according to MorningStar data. The WealthBar Aggressive ETF portfolio, which has the highest weight in equities was down 13.71% over that same period. The WealthBar Safety ETF which has the lowest weight in equities was down 5.04%.

WealthBar’s Private Investment Portfolios, in particular have held relatively steady during February’s market turbulence. With mandates designed to enhance diversification and mitigate risk by using a larger range of asset classes, these private investments aren’t as exposed to the markets ups and downs

Here’s how market trends affected WealthBar portfolios in February:

Performance[block]13[/block]

ETF Portfolios

February performance 1-Year performance
ETF Safety Portfolio -1.18% 4.00%
ETF Conservative Portfolio -2.22% 4.58%
ETF Balanced Portfolio -3.38% 5.48%
ETF Growth Portfolio -3.97% 5.91%
ETF Aggressive Portfolio -4.74% 6.36%

The composition of each portfolio and further information can be accessed by clicking the portfolio name.

Private Investment Portfolios

February performance 1-Year performance
Safety Private Portfolio -0.76% 4.84%
Balanced Private Portfolio -1.87% 5.94%
Aggressive Private Portfolio -2.41% 4.89%

The composition of each portfolio and further information can be accessed by clicking the portfolio name.


*This is a hypothetical illustration of our portfolio performance as of the date noted above. The time-weighted performance is displayed in Canadian dollars and assumes daily rebalancing and the reinvestment of distributions. It is reflective of the model portfolio’s target holdings and weights including portfolio changes. The performance is net of the management expense ratios (MERs); however, does not include WealthBar’s management fee or taxes. Performance is annualized for all periods greater than one year. This performance may differ from clients’ actual account return due to the timing of deposits, withdrawals, buys and sells, and the reinvestment of distributions.

The performance provided is for informational purposes only and is not to be considered as investment advice. Portfolio performance is not guaranteed. The value of your investment can go down, up and change frequently. Past performance is not indicative of future returns. There may be significant differences between the investment portfolios that are not discussed here, including different investment objectives and risk factors. You should always consider, in any investment decision, your investment objectives, needs, circumstances, restrictions, tolerance for risk, financial goals and investment time frame.

Although WealthBar believes the obtained information provided from third-party sources to be reliable, WealthBar does not guarantee the information and disclaims any liability associated with the use of these performance results. Source: Morningstar Direct. For full details of calculation please contact: info@wealthbar.com.

The post Market Update: Coronavirus Concerns Ignite Global Equity Market Weakness appeared first on WealthBar Blog.

%d bloggers like this: