Zigging when others zag
This past Christmas, we spent a few days in downtown Calgary at a swanky hotel, paying something like 25 per cent of the normal price because there was just so very much room in the inn. The very heart of Cowtown was notquite-eerily deserted as the pressing throngs headed to the ski hills for their dream vacations – among many, many thousands of others getting away from it all. It was a very pleasant fluke.
The posh domicile was barely half full, and the holly jolly desk clerk threw in free breakfast for the family – a seasonal gesture he offered before he saw the size of my extended family. Mwa ha ha, uh, I mean Ho Ho Ho!
The markets also headed for the hills this week again.
Actually, US markets are vaguely positive at this point on the five-day week, but the main winner seems to be unpredictability. On the other hand, as and when the COVID-19 runny nose blows over, as all the others have done, it’ll be
Dollar-Forty-Nine day and the crowds will rush in after the bargains.
Indicators from our RBC Economics team weigh in with encouraging core data, but for now it’s all tempered by the uncertainty of the intrepid bundle of chemicals sneezing red and green on the screen.
The US labour market was on solid footing through the first two months of the year with back-to-back payroll gains of 273,000.
That represents the best two-month increase in two years. A dip in the unemployment rate back to a 50-year low also made for what would normally be an encouraging report, though wage growth remained contained at three per cent year-over-year.
But given its backward-looking nature, these numbers will do little to soothe financial markets amid growing worries about the economic impact of coronavirus. Labour market data likely won’t be the first to show signs of economic dislocation related to the outbreak and containment efforts. Business and consumer confidence information will be key indicators predicting an economic slowdown. Purchase Manager’s Index (PMI) data will show supply chain disruptions, and consumer spending data (particularly on travel, tourism and hospitality) are likely to show the earliest impacts. But any drop-off in hours worked (if people are forced to stay home due to school or workplace closures) or layoffs due business disruption would indicate a deeper impact from the coronavirus outbreak. So while recent payroll numbers are impressive, this data is already well past its sell-by date.
All of us intend prescience as we stab at market timing, but we are up against Eris, (the Goddess of Chaos), and clearly outmatched. The most reliable ideas are stay-fluff marshmallow-big, juicy, and low-hanging. Solid earnings, reliable dividends, long-term viability, and the occasional good old early-bird discount if we happen to have cash on hand when Woodwards has too many bananas.
Put another way, if you had a welldesigned global balanced portfolio the day you hung up your chocolate-a-day advent calendar last year, but fell and hit your head and lay in a coma until yesterday, chances are your portfolio would be about where it was the day you fell over.
Plus, you’d have 24 chocolates to eat. Not a bad deal really.