Odds of 99% that global recession has already started, according to Toronto advisor
It’s a 99% probability that a global recession has already started, according to one advisor.
John De Goey, portfolio manager at Wellington-Altus Private Wealth, surveyed the debris from yesterday’s market drops and insisted that nobody should be surprised. Many people, himself included, he said, predicted a recession in 2020 long before anyone had heard of coronavirus or COVID-19.
While the oil price row compounded the health scare to trigger yesterday’s panicked sell-off, De Goey suspects that the market has further to drop. Advisors frantically ringing clients are likely not prepared, he said, and a call to comfort “Nervous Nellies” is likely to backfire.
He said: “Like many advisors, I often re-enforce that markets are volatile and can therefore head south at any time. Since this has been said repeatedly - i.e. it categorically will happen, we just don’t know when or why or for how long - there’s nothing to do to deal with days like [yesterday].
“In fact, I would argue that calling clients now would be a lot like the U.S. central bank cutting rates last week – something that smacks of desperation and therefore has a destabilizing effect.”
De Goey believes there are investment opportunities in anything that is inverse and makes money because the markets are dropping. He added, to a lesser extent, real estate and, up to this week, bonds as other areas that could mitigate some of the pain. Long bonds, though, have too much risk.
“To some extent, people who have large sums to invest and who are willing to be patient in finding an entry point will also likely benefit,” he said. “If I had cash laying around, I wouldn’t be rushing to invest in this market, for instance.”
While he expects a rebound, he warned it may not happen as quick as many people hope or expect.
He added: “My expectation for North American stocks for the decade of the 2020s is something like 0%. For example, a drop of 50% in 2020 followed by an 8% annualized return for the next 9 years would get us more or less back to where we started. Based on valuations - i.e. the Shiller CAPE for the S&P 500 - that seems entirely reasonable. Advisors need to set more reasonable expectations.”
