Investing advice for the market downturn

Financial advisors suggest looking at large trends when deciding how to manage your money during the pandemic

At the first family Zoom meeting in late March, my wife said, “Wow, these guys must be making a killing – time to buy some Zoom stock.” Without missing a beat, my brother replied, “I already checked and the shares are already too expensive.” 

If, like my brother, you’re fortunate enough to still have a steady income during the coronavirus pandemic, what is worth investing in? One rule of advice: select your investment target based on the macroeconomic trends that are taking shape.

“There’s the work-from-home trend, the reopening trend and what I would call ‘the New Normal trend’ – as we all try to figure out what the world will look like going forward without the benefit of a vaccine,” explains Anish Chopra, managing director of Toronto-based private investment firm Portfolio Management Corporation.

“In terms of these trends, what you’re looking at as an investor is a company that can make it through for the better times that will be here three to five years out,” he adds. “Overall, it’s a company that you think will survive the tough months and maybe years ahead. These are companies with financial strength and the right business model to come out the other side of the pandemic intact.”

For Arthur Salzer, CEO and CIO of Markham-based Northland Wealth Management, only one Canadian company fits that bill: Shopify. Just last week, the e-commerce technology company was named the most valuable company in the country from a market capitalization-basis valued at north of $100 billion.

“Could [Shopify] take on Amazon or be a peer to Amazon at the trillion dollar valuation? It’s possible, it may even be probable. It’s a highly volatile stock, but if you’re looking for the next Amazon, the next Apple, research it and see if you want to add it to your portfolio,” he adds, stressing that you shouldn’t put all your net worth into it, but “a one to three per cent position may make sense.”

If you’re looking to invest in real estate, the trend pre-COVID-19 was certainly upward. But, in this pandemic world, the question you have to ask yourself is: are the trends pre-pandemic going to be the trends post-pandemic and will those trends reappear quickly?

“For example, before COVID-19 there was a strong immigration trend, I would say the immigration trend will slow without the ability to travel,” says Chopra.

Salzer advises against investing in real estate, pointing out that it has risen over the last 20 years, but over the long term its growth only protects you against inflation.

“Real estate markets have an ebb and flow. You might get lucky and hit a 20- to 30-year wave, but overall, real estate is not a good investment. It’s a good investment for 20 years, but not 100, 200 or 300 years,” says Salzer.

From an affordability standpoint Salzer recommends renting over the next 10 years and investing your money in other ways, as opposed to doing it through leveraged residential real estate.

“The tide can go against you and I don’t believe the current generation of homeowners really understand that,” he adds

When looking at resources as an investment, it still comes down to supply and demand.

“I think investors have to go commodity by commodity and understand what the supply-demand dynamic is. For example, right now there’s less demand for oil, but at some point that will recover, it’s just hard to know when,” says Chopra.

The amount of stimulus injected into the global economy in 30 days was equivalent to a year’s worth of China’s GDP. Stabilization worked, but eventually we either have to pay for the debt or the governments will monetize it so the debt doesn’t mean that much.

“Monetization means the devaluing of fiat currency. The U.S. dollar is the reserve currency of the world – the best paper currency in the world today. But people have used other assets over time to try to hedge against the declines of paper currencies,” says Salzer

“So, most investors should be looking at an investment in the gold sector, probably with bullion of some sort. It might be five per cent in your portfolio, it might be 20. It shouldn’t be 100, but it should be looked at and it should be examined.”

Salzer says Bitcoin, not just cryptocurrencies, should also be considered if you like the gold argument.

“It’s being called digital gold. After thousands of hours of research, we don’t like other cryptocurrencies and though Bitcoin is volatile, it has performed well and is a top performing asset class over the last 10 years.”


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