It’s Monday but the Canadian stock markets are closed for the civic holiday while the U.S. markets are open.
On Friday Toronto was down 0.8%. Losers included Canadian Western Bank down 2.8% to $22.80. Shopify bounced down 3.1%. RioCan was down 2.7% and Linamar was down 3.9%. In The U.S, the S&P 500 was up 0.7% on Friday.
This Monday morning, the S&P 500 is up 0.6% and the headlines credit this to hoped for added economic stimulus. This includes Apple – up another 3.5%. And Shopify which is bouncing back in U.S. trading, up 4.4%.
So, we have U.S. markets continuing to rise ever higher for reasons that would include record low interest rates that make alternatives to equities less attractive, hopes for a vaccine and hopes for more massive government stimulus of the economy.
Risks that the market seems to be ignoring include potential re-lockdowns, failure of vaccines to be effective and continued lower economic activity. Also a Biden presidency is generally considered bad for the markets but the markets seem to be ignoring that. There is talk of Trump delaying the election over the protests of the democrats. There is talk of Trump declaring the election invalid, due to problems with mail-in ballots, if he loses. These would seem to be real risks some of which could be very bad for markets (not to mention democracy!) if they occurred. Therefore it would seem prudent to review our exposures to equities and not be caught with too much in equities and too little in cash or safe investments in the event of a big decline. Everyone’s situation is different and some may have both the emotional tolerance and the financial capacity to take the risk of being 100% invested in equities. But everyone should consider whether they have too much or too little exposure to equities at this point.