In this photo provided by the New York Stock Exchange, traders work on the floor, Monday Feb. 22, 2021. THE CANADIAN PRESS/AP-(Courtney Crow/New York Stock Exchange via AP

In this photo provided by the New York Stock Exchange, traders work on the floor, Monday Feb. 22, 2021. THE CANADIAN PRESS/AP-(Courtney Crow/New York Stock Exchange via AP

Holding on during stock market roller-coaster was key to success, experts say

Now, stock indexes have gone on to set record highs — the S&P 500 closed above 4,000 points

When the bottom fell out of North American stock markets a year ago, few investors would have imagined how unsettled the world would remain a year later, even after a massive financial rebound.

People were in panic mode back in February and March of 2020, recalls Candice Bangsund, portfolio manager for Fiera Capital.

“Investors were liquidating their portfolios aggressively in response to the uncertainty and the unprecedented nature of the pandemic,” she said in an interview. “As a result, a lot of investors likely missed the corresponding upturn that ensued.”

When Bangsund and other market-watchers look back at the past year, a reminder for nervous investors to hang on for the long term even during the wildest market gyrations is an often-repeated takeaway.

The The Toronto Stock Market lost 38 per cent of its value in four weeks in early 2020, including three days in which it fell by more than 1,000 points. On March 23, it plunged to a low of 11,172 points.

“March was particularly crazy,” said Colin Cieszynski, chief market strategist at SIA Wealth Management. “It was hard to get a read on anything because markets were gyrating so much.

“Forget about day to day, from hour to hour.”

Unprecedented moves by global central banks to cut interest rates to rock-bottom levels and subsequent fiscal stimulus prevented a depression and provided needed support for the rebound and very lucrative market conditions that currently exist.

Investors were not expecting that type of unprecedented policy response, said Bangsund.

“The timing and the magnitude of the support completely exceeded expectations and has been a key source of that upswing that we saw through 2020.” By August of 2020, markets were well into rebound territory.

Now, stock indexes have gone on to set record highs — the S&P 500 closed above 4,000 points for the first time on Thursday — with analysts predicting continued growth throughout the year.

“At the end of the year things were actually positive and a relatively good year. Obviously it was a roller-coaster ride of a generation, or a lifetime,” said Allan Small, senior investment adviser at IA Private Wealth.

Technology led during the downturn as companies tied to people working from home prospected. Ottawa based Shopify Inc. became the most valuable company on the TSX as retailers rushed to open online versions of their stores. The technology sector also provided a defensive tool to offset declines when markets soured.

But like Bangsund, Small believes some Canadian investors missed out on the recovery by bailing out too soon or moving to defensive positions.

“I think those that bailed fully they were sorry they did. Those that hung into the market, obviously they were rewarded for doing so.”

Small said he was able to convince all of his clients to at a minimum stay the course, while many increased their investments.

“All my clients were happy they did and for those that added, they were even happier.”

The number of Canadian stock market transactions surged throughout 2020, according to monthly trading statistics from the TMX, which operates the Toronto Stock Exchange, TSX Venture Exchange, TSX Alpha Exchange and Montreal Exchange.

The number of transactions more than doubled to 57.5 million while their value surged almost 80 per cent to $350.8 billion in March from $195.4 billion in March 2019. For all of 2020, the value of transactions increased 34 per cent to $2.5 trillion.

Similar growth was seen across North American stock exchanges, particularly from retail investors interested in technology and life sciences.

Sales of mutual funds and ETFs (exchange traded funds) also increased, although they dipped during the depth of market sell-off, according to data from the Investment Funds Institute of Canada.

The past year reinforces why people were wise to invest throughout the turmoil, said Crystal Maloney, head of equity research at CIBC Asset Management.

“If you aren’t invested during these key times of recovery, you can give up a lot of your long-term returns as we’ve seen time and time again.”

The level of trading activity is a good indication that people were positioning more defensively last year and then switched to the reopening trade in anticipation of vaccine development and inoculations, she said.

While the financial market response to the onset of the pandemic was not typical, it would have been understandable if markets had fallen even more sharply than they did, said Eric Lascelles, chief economist at RBC Global Asset Management.

“Indeed, it was a source of some frustration for savvy investors that there was not a juicier buying opportunity last spring,” he said in an email.

The stock market normally significantly overreacts to economic shocks, but this time the response was more rational than usual.

That’s because the market learned important lessons from the prior decade when equities fell too far during the global financial crisis. And this time, the pandemic was inherently artificial, with governments restricting activities and providing unprecedented stimulus that curtailed distress.

While a market rebound well in advance of the underlying economy is normal, the degree of enthusiasm was unusual so soon after a recession, he said.

“We expect further rapid growth over the next few years, and ultimately little scarring,” Lascelles said, adding that while valuations are high by historical standards, they are attractive compared with the ultra low-yield bond market.

“In other words, the risk premium enjoyed by equity-holders remain sufficiently large to make current valuations tolerable and likely sustainable.”

Ross Marowits, The Canadian Press


Like us on Facebook and follow us on Twitter.

Want to support local journalism during the pandemic? Make a donation here.

Coronaviruseconomy

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Food trucks will be allowed to operate in several Sooke parks beginning May 1. (Black Press Media file photo)
Sooke’s food truck pilot project under scrutiny

Councillor questions impact food trucks will have on nearby restaurants

A walk for autism awareness. (Black Press Media file photo)
COLUMN: Autism acceptance, not autism awareness

Elizabeth Sparling is the mother of a 24-year-old son with Autism Spectrum Disorder

Claremont Secondary’s year-long drama class will perform TRAP, a thrilling play by Stephen Gregg, virtually from April 14-17 at 7 p.m. (Image courtesy Colin Plant)
Claremont’s drama students to ‘TRAP’ audience’s attention with thrilling virtual performances

Grade 9-12 drama class will perform via livestream from April 14-17

Eli, left, Brent, Lindsay and Ava Wilson. (Photo courtesy of Lindsay Wilson)
West Shore families share experience in raising a child with autism

Two families reveal some parallels, but circumstances are different for everyone

B.C. Health Minister Adrian Dix and Premier John Horgan describe vaccine rollout at the legislature, March 29, 2021. (B.C. government)
1,262 more COVID-19 infections in B.C. Friday, 9,574 active cases

Province’s mass vaccination reaches one million people

As of Saturday, April 10, people born in 1961 are the latest to be eligible for a COVID-19 vaccine. (Black Press files)
B.C. residents age 60+ can now register to get their COVID-19 vaccine

Vaccine registration is now open to people born in 1961 or earlier

A new saline gargle test, made in B.C., will soon be replacing COVID-19 nasal swab tests for kids. (PHSA screenshot)
Take-home COVID-19 tests available for some B.C. students who fall ill at school

BC Children’s Hospital plans to provide 1,200 kits to Vancouver district schools this April

Ruming Jiang and his dog Chiu Chiu are doing fine following a brush with hypothermia that saw several people work together to get them out of the Fraser River near Langley’s Derby Reach Park on March 25, 2021 (Special to the Advance Times)
Man finds men who rescued him from drowning in B.C.’s Fraser River

A grateful Ruming Jiang says he will thank them again, this time in person when the pandemic ends

Tyson Ginter, 7, is proud of his latest Hot Wheels he recently received by Quesnel RCMP Const. Matt Joyce. (Photo submitted)
B.C. Mountie handing out toy cars to light up children’s faces

‘A lot of times it will be the only interaction they have with the police,’ says Const. Matt Joyce

Chief Public Health Officer Theresa Tam speaks during a technical briefing on the COVID pandemic in Canada, Friday, January 15, 2021 in Ottawa. THE CANADIAN PRESS/Adrian Wyld
Canada’s ICUs see near-record of COVID-19 patients last week as variant cases double

Last week, Canadian hospitals treated an average of 2,500 patients with COVID-19, daily, up 7% from the previous week

University of Victoria rowing coach Barney Williams at the University of Victoria in Victoria, B.C. THE CANADIAN PRESS/Chad Hipolito
UVic, women’s rowing coach deny former athlete’s allegation of verbal abuse

Lily Copeland alleges coach Barney Williams would stand close to her and speak aggressively in the sauna

Librarian Katie Burns with the Fraser Valley Regional Libraries poses for a photo in Chilliwack on June 18, 2019. Monday, April 12, 2021 is Library Workers’ Day. (Jenna Hauck/ Chilliwack Progress file)
Unofficial holidays: Here’s what people are celebrating for the week of April 11 to 17

Library Workers Day, That Sucks! Day, and Wear Your Pyjamas to Work Day are all coming up this week

Nanaimo RCMP are asking for the public’s help in identifying the man suspected of being involved in a stabbing. (Photo submitted)
Nanaimo RCMP trying to identify stabbing suspect who wielded rusty knife

Stabbing followed argument between two men at Port Place Shopping Centre April 1

Most Read