It’s hard to believe that it’s been six weeks since the team at Forge First has seen each other. Yet our operations and investment processes have remained fully intact and running smoothly. Do we really need that office space? Do urban families really need a 2nd car? Of course I’m just joking when it comes to these questions, and while I am looking forward to that glass of wine at a bar with friends or watching the Leafs or Raptors live, there’s little question that some habits will change and other trends will be reinforced, both of which having ramifications for equities.
For many reasons it’s an understatement to say the relationship between Prime Minister Trudeau’s Government and Canada’s energy patch is strained. Now desperate for help from the effect of the twin punches of COVID-19’s demand shock and the supply jolt arising from the Saudi Russian price war, Canada’s energy sector has never been in such critical condition. Waiting for Ottawa’s promised life support program for the past month, Trudeau’s team finally delivered its first dose of medicine this past Friday. While it’s a far cry from the $30B bailout prescription the sector was seeking, the proposals appear to be an okay start, though as always, the devil will be in the details.
March 2020 was an awful month for humankind, financial markets and our funds. North American equity indices saw total return losses of 12.35% for the S&P500 and 17.38% for the TSX. The waterfall declines were fuelled by the excess leverage in corporate credit and shadow banking, largely in the U.S. followed by a more general selling of financial assets. While the rapidity of the declines had the years 2008 & 1929 on the lips of investors, unlike those bears, this attack was triggered by an exogenous event. Global equities lost US$7.88T of their value during the month of March 2020 or US$14.88T since their high on February 19th.
The U.S. Federal Reserve (“Fed”) tabled an emergency 0.50% interest rate cut Tuesday, its first such move since the 2008 Financial Crisis, catalyzing other Central Banks to follow suit. In addition, post cut commentary from Powell “implied additional rate cuts will be forthcoming”. In contrast, two hours before the Fed’s cut, a press release from G7 Finance ministers indicated that they’re ready to act, but not yet. As is so often the case, to quote two clichés, timing is everything and action speaks louder than words.