March 12, 2020
8:45 am EDT
At SIA Wealth Management everything we do is based on Relative Strength Analysis. We evaluate the Relative Strength between asset classes giving us insight into money flows on a large scale, and from this select top ranked investments.
Market Commentary By:
Colin Cieszynski, CFA, CMT
Chief Market Strategist
+1 (647) 282-4428
The coronavirus outbreak, which the World Health Organization has now designated a pandemic, continues to impact the world economy and world markets. The economic impact has continued to deepen with additional measures being undertaken to slow the spread including Italy shutting down its country, the US starting a 30-ban on flights to and from Europe, and sports leagues suspending games. Investors continue to watch on the other hand for signs of stimulus, who appear to be particularly disappointed with the lack of concrete fiscal support out of the United States, particularly after Canada and the UK acted yesterday.
More monetary support could be on the way in the coming days. The European Central Bank held its benchmark rate but has temporarily relaxed capital buffers for banks to free up capital and increase financial flexibility. Banks have been ordered to use this capital relief to help the economy and not to increase their dividends. The US FOMC (who has once again been doing the heavy lifting to date stateside) meets again next week (March 17-18).
The suspension of US-Europe flights has put pressure on markets overnight. US futures hit limit-down with 5.0-5.2% declines. Note that as we saw on Monday, a 7.0% intraday decline would trigger a 15-minute trading halt. We may or may not trip the circuit breaker again as European indices are down between 4.8% for Milan to 6.0% for Frankfurt, with the ECB news sparking a small bounce of about 0.3% in the last few minutes. Crude oil is getting hammered again with WTI down 6.25% toward $30.90/bbl, but so far it continues to hold above $30.00.
Canadian investors may want to note that the Australian market, which has a similar sector composition to the Canadian market, fell another 7.4% overnight. Asia-Pacific markets were otherwise not hit as hard overnight with declines varying between 1.5% for Shanghai to 4.4% for Tokyo with Hong Kong and Seoul both down about 3.8%.
Meanwhile, the flow of capital into defensive havens continues to subside. US bonds have levelled off with the 10-year treasury yield holding near 0.7%. Gold continues to fall away from its recent peak near $1,700/oz, trading near $1,615 down 1.7% today.
Disclaimer:Â SIA Wealth Management Inc. (SIAWM) specifically represents that it does not give investment advice or advocate the purchase or sale of any security or investment whatsoever. This information has been prepared without regard to any particular investor’s investment objectives, financial situation, and needs. None of the information contained in this document constitutes an offer to sell or the solicitation of an offer to buy any security or other investment or an offer to provide investment services of any kind. As such, advisors and their clients should not act on any recommendation (express or implied) or information in this report without obtaining specific advice in relation to their accounts and should not rely on information herein as the primary basis for their investment decisions. Information contained herein is based on data obtained from recognized statistical services, issuer reports or communications, or other sources, believed to be reliable.Â SIAWM nor its third party content providers make any representations or warranties or take any responsibility as to the accuracy or completeness of any recommendation or information contained herein and shall not be liable for any errors, inaccuracies or delays in content, or for any actions taken in reliance thereon. Any statements nonfactual in nature constitute only current opinions, which are subject to change without notice.