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

Island Health has reported a COVID-19 exposure at Ecole Victor-Brodeur in Esquimalt on April 12, 13 and 14. (Screenshot via Google Streetview)
COVID-19 exposure confirmed at K-12 French school in Esquimalt, Island Health reports

People at Ecole Victor-Brodeur may have been exposed April 12-14

The BC SPCA’s Wild Animal Rehabilitation Centre is asking for donation support as it prepares for its busiest season of the year. (Photo courtesy of BC SPCA)
Wild ARC looking for donations to care for yearly influx of vulnerable animals

Spring and summer are the southern Vancouver Island centre’s busiest time of the year

North Saanich Fire Department is looking for individuals interested in becoming volunteer firefighters who want to give back to the community and learn new skills while gaining personal confidence. (Submitted/District of North Saanich)
North Saanich actively recruiting volunteer firefighters

Department is searching for new recruits from now until the end of May

Local carpenter Tyler Bohn embarked on a quest to create the East Sooke Treehouse, after seeing people build similar structures on a Discovery Channel show. (East Sooke Treehouse Facebook photo)
East Sooke carpenter builds the ultimate tree fort

East Sooke Treehouse takes flight as an Airbnb

A native-to-B.C. wild queen bee (bombus melanopygus for those in the know) feeds on a periwinkle flower. (Submitted/Sarah Johnson, Native Bee Society of BC)
Wild bees need messy gardens to survive

The year-long nesting period makes habitat a primary concern for wild bees

Rainbow trouts thrashing with life as they’re about to be transferred to the largest lake of their lives, even though it’s pretty small. These rainbows have a blue tinge because they matched the blue of their hatchery pen, but soon they’ll take on the green-browns of their new home at Lookout Lake. (Zoe Ducklow/News Staff)
VIDEO: Lookout Lake stocked with hatchery trout to delight of a seniors fishing club

The Cherish Trout Scouts made plans to come back fishing soon

A Western toadlet crosses the centre line of Elk View Road in Chilliwack on Aug. 26, 2010. A tunnel underneath the road has since been installed to help them migrate cross the road. Saturday, April 24 is Save the Frogs Day. (Jenna Hauck/ Progress File)
Unofficial holidays: Here’s what people are celebrating for the week of April 18 to 24

Save the Frogs Day, Love Your Thighs Day and Scream Day are all coming up this week

A vial of some of the first 500,000 AstraZeneca COVID-19 vaccine doses that Canada secured. THE CANADIAN PRESS/Carlos Osorio
Canada’s 2nd blood clot confirmed in Alberta after AstraZeneca vaccine

The male patient, who is in his 60s, is said to be recovering

Valen a student of Coldstream Elementary writes advice for adults amid a pandemic.
‘We can get rid of COVID together’: B.C. kids share heartwarming advice

Elementary students share their wisdom to adults in unprecedented times

The funeral of Britain’s Prince Philip in Windsor, England, on Saturday, April 17, 2021. Philip died April 9 at the age of 99. (Kirsty Wigglesworth/AP)
PHOTOS: Prince Philip laid to rest Saturday as sombre queen sits alone

The entire royal procession and funeral took place out of public view within the grounds of Windsor Castle

B.C. Health Minister Adrian Dix and Premier John Horgan describe vaccine rollout at the legislature, March 29, 2021. (B.C. government)
B.C. health minister says delay in Moderna vaccine ‘disappointing’

‘The sooner we get vaccines in people’s arms the better, and inconsistency in delivery is a consistent problem. This is simply a reality and not an issue of blame,’ Adrian Dix said Friday

(Police handout/Kamloops RCMP)
B.C. man dies in custody awaiting trial for Valentine’s Day robbery, kidnapping spree

Robert James Rennie, who was on the Kamloops RCMP’s most wanted list, passed away at the North Fraser Pretrial Centre in Coquitlam

Photos of Vancouver Canucks players are pictured outside the closed box office of Rogers Arena in downtown Vancouver Thursday, April 8, 2021. THE CANADIAN PRESS/Jonathan Hayward
Canucks to return to play Sunday versus Leafs after COVID-19 outbreak

The team has had 11 games postponed since an outbreak late last month

For Leela Harrop, the recent death of her brother Raju Tiwari pushed her to sign up for the vaccine. Photo supplied
Island woman on fence about vaccine prompted by brother’s death

Leela Harrop of Comox says she did have issues with signing up online this past week

Most Read