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

Garth Dauncey is one of the volunteers working on renovations at a Langley City home for the AOK Extreme Home Repair project. (Matthew Claxton/Langley Advance Times)
AOK home repair could use funding support to aid Langley family

A GoFundMe is looking to raise up to $80,000

Calvin Singh, a 17-year-old Aldergrove Secondary student, earned the Jodi Steeves Kindness Scholarship. (Special to The Star)
Aldergrove teen earns Jodi Steeves Kindness Award and the $1,000 that goes with it

Calvin Singh won the scholarship for showing constant kindness and positivity

Langley’s Avery Heppell has been named to Volleyball Canada’s Women’s NextGen National Team. (TWU)
Langley’s Avery Heppell has been named to Volleyball Canada’s Women’s NextGen National Team

Trinity Western University player to attend 10-week training session

One man was seriously injured in a shooting incident at the Willowbrook Shopping Centre on Monday, May 3. (Dan Ferguson/Langley Advance Times)
LETTER: Student poem about Langley shooting gets to the heart of the matter

All the gang violence is fueling the fight, says a young writer

One of three new hangars can be seen going up at the new Langley airport terminal building, blocking the view of the old air traffic control tower (L) , which was closed when NAV Canada operations shifted to the new tower (R).(Dan Ferguson/Langley Advance Times)
Construction of new Langley airport terminal building nears completion

NAV Canada has moved into the new tower in the terminal, which means work on hangars can proceed

A bullet hole is seen in the windshield of an RCMP vehicle approximately 4 km from Vancouver International Airport after a one person was killed during a shooting outside the international departures terminal at the airport, in Richmond, B.C., Sunday, May 9, 2021. THE CANADIAN PRESS/Darryl Dyck
Homicide team IDs man in fatal YVR shooting as police grapple with spate of gang violence

Man, 20, charged in separate fatal shooting Burnaby over the weekend

Colleen Price, Vancouver Island University’s bachelor of science in nursing program chairperson, says she is impressed with how students have persevered through the COVID-19 pandemic. (Chris Bush/News Bulletin)
Next generation of B.C. nurses already showing resilience

University program head says learning had to be adjusted amidst pandemic

Two-year-old Kashius Weme rides at the Steve Smith Memorial Bike Park in Nanaimo on Tuesday, May 11. The youngster’s precocious bike-riding ability is already attracting cycle sponsors. (Chris Bush/News Bulletin)
2-year-old B.C. bike rider already attracting cycle sponsors

Nanaimo’s Kashius Weme has a knack for extreme cycle sports

Keith MacIntyre - BC Libertarian
Penticton’s Keith MacIntyre new leader of the B.C. Libertarian Party

The Penticton businessman was voted in by members of the party on May 8

Cannabis bought in British Columbia (Ashley Wadhwani/Black Press Media)
Is it time to start thinking about greener ways to package cannabis?

Packaging suppliers are still figuring eco-friendly and affordable packaging options that fit the mandates of Cannabis Regulations

RCMP are searching for Philip Toner, who is a 'person of interest' in the investigation of a suspicious death in Kootenay National Park last week. Photo courtesy BC RCMP.
Man sought in suspicious Kootenay death found in Lake Country

Philip Toner is a person of interest in the death of Brenda Ware

Vernon North Okanagan RCMP reported to 287 mental health calls between Jan. 1, 2021, and May 1. (Black Press files)
‘It’s not the police’s responsibility to deal with mental health calls’: Vernon RCMP

RCMP remind public to take care of mental health and well-being, while better solutions are sought

Thompson Rivers University campus is in Kamloops, B.C. (KTW file photo)
Thompson Rivers the 1st B.C. university to supply free menstrual products

The university will offer the products this September

Fraser Health is using ‘targeted’ vaccination clinics in high-risk areas of the Lower Mainland. (Fraser Health photo)
B.C.’s COVID-19 decrease continues, 515 new cases Tuesday

426 seriously ill people in hospital, up from 415 Monday

Most Read