TSX enters bear market amid COVID-19 pandemic

TORONTO Canada’s main stock index crossed into bear market territory Wednesday in the wake of the World Health Organization declaring the novel coronavirus outbreak a pandemic.

The S&P/TSX composite index closed down 688 points or 4.6 per cent at 14,270.09. A bear market is commonly defined as a loss of 20 per cent from a recent high. The TSX ended the day down 20.6 per cent off the record high of 17,970.51 set on Feb. 20.

U.S. stock markets also moved into bear market territory with the Dow Jones industrial average losing 1,464.94 points or 5.9 per cent at 23,553.22. That’s 20.3 per cent off its last high, also in February.

The S&P 500 index was down 140.85 points at 2,741.38, while the Nasdaq composite was down 392.20 points at 7,952.05. Both indexes were just short of the 20-per-cent threshold.

The bull run of rising stock prices that has endured more than 11 years is expected to resume its climb in the second half of the year after the economic effects of the COVID-19 subside and monetary and fiscal stimulus kicks in.

In the meantime, markets may continue to drop, possibly five to 15 per cent, before recouping losses to end the year higher, says Candice Bangsund, portfolio manager for Fiera Capital.

“We are going to see near-term volatility — short-term pain for long-term gain, that is our base case,” she said in an interview.

Fiera trimmed its year-end forecast for the TSX to 18,200, which would imply a 27.5-per-cent increase from the current level.

Strategists at Goldman Sachs on Wednesday sharply cut their expectations for earnings growth this year, which they said could drag the S&P 500 index down to 2,450 in the middle of the year for a nearly 28-per-cent drop from its record performance. The banking firm also says the drop will be short lived, with the S&P 500 possibly rising back to 3,200 by the end of the year.

The midweek downturn marked a large swing from the prior day’s trading and wild market gyrations over the past couple of weeks.

All 11 major sectors on the TSX decreased in a broad-based decline of between three and 7.4 per cent.

Energy was the worst performer as crude oil prices once again fell as the United Arab Emirates joined Saudi Arabia in agreeing to boost production in a war with Russia.