The markets staged an epic rally on Tuesday mostly in response to an epic U.S.A. financial aid package expected to be passed imminently. Apparently 2 trillion and there was talk that along with other measured the total was $6 trillion. That’s 10 times larger proportionately than the $60 billion or so Canada is currently looking at. That is $6 trillion for the U.S.A. (if that is true) is equivalent to $600 billion in Canada.
The S&P 500 was up 9.4% and Toronto was up 12.0%.
Trump’s talk of reopening the economy by Easter Sunday may also have been part of the excitement.
So, for today at least, my thought that the down-draft would continue was wrong.
But should we expect the market to reverse this rally? Or will the ultimate passing of the aid package push the rally even higher? It is possible that the market sees a deep valley ahead but is looking past it to the other side and deciding that stocks are already down enough.
Pushing the other way will be:
Case counts and death counts in the U.S. that are threatening to become fairly epic.
Job loss figures that are sure to be epic in both the U.S.A. and Canada.
Corporations are likely to start announcing dividend cuts or at least big drops in outlook. Can the aid packages simply make them whole?
In Canada today the case counts were still rising. That was disappointing although probably to be expected given more testing and given (probably) a lot of people flying in with the virus. I am not seeing much information on local transmission or exactly how that occurs. We don’t know yet if we will have to start grocery deliveries and end trips to grocery stores.
There may be good news from a few other countries and certainly China but it does not seem to be much in the news. American media will focus on American cases and deaths. Will we start to hear of celebrities dying from the disease.
I am going to look at specifics for some of the companies on our list. I am starting with the Melcor REIT. No doubt there are better candidates for bargain hunting but I will start with what I own and know something about. At its current price around $3.00 the RIET looks like a reasonable candidate. It does have debt. It will lose revenue. But is has a lot of strong tenants including the provincial government. The worse case for a REIT (or any company) would be if revenues (and the outlook) fell so much that effectively the equity was wiped out and the debt holders would own what is left. It does not look to me like that would happen to the Melcor REIT. But as we have all recently learned just about anything is possible. The REIT also has a convertible debenture that recently traded at 50 cents on the dollar. That could be a good bet. We should all avoid however going too heavily into any one name.
If you are looking to just put cash into the market with out getting into specific stocks then look at broad based ETFs. There are links to these on the subscriber home page. For example VGRO and VBAL and there are many others.