Investor Economics Insight April 2020

Another bull market, another crisis:
What is new and what is old in the era of COVID-19?

Economic and market crises are not new phenomena, but each downturn comes with its own unique elements. Pasts crises often acted as a catalyst, contributing to accelerate trends that were already underway and also destabilizing businesses, governments and households that were caught in a precarious position.

The current crisis has all the elements needed to create an ominous environment for investors, workers and businesses big and small. The expansionary economic cycle that ended abruptly in late February of 2020 was built on a foundation that included relatively stronger and weaker elements. One of the cracks more vulnerable to break under pressure was the significant level of indebtedness of households, corporations and governments in many global markets—including Canada.

With market valuations trending down and exhibiting significant volatility, some investors have rushed for the exits while advisors scramble to bring solace—and clarity—to their clients. In this environment, asset managers are being hit hard while facing the prospect of a long-lasting slump in the top- and bottom-lines of their businesses, and an even longer horizon until appetite for risk-taking (and household capacity so save) returns one day.

The current issue of Insight presents our early evaluation of the many moving parts impacting the wealth management business, investors and advisors during the current crisis.