Market Update: Red Friday

A new South African Covid variant spooked investors this morning. The World Health Organization (WHO) and scientists in South Africa are hastily working to determine how quickly the B.1.1.529 variant can spread and whether it is resistant to existing vaccines. A number of European and Asian nations have suspended flights from southern Africa (including Canada) and the European Commission said this morning that all 27 member states should cease travel into the bloc from southern Africa. 

With Black (RED) Friday here consumers are increasingly nervous about taking money out of their wallets to spend. US consumer confidence hit a 10-year low in November as inflation increased to the highest levels since the early 1990s. According to a recent poll over 10% of US consumers plan on sitting out the holiday season – not purchasing gifts, gift cards, or other items.

Investors have poured almost $900 billion into equity ETF’s and long-funds, which is more than the combined total of the past 19 years. Investors have pulled money out of stocks only twice this year, which could mean further skittishness in the markets as they continue to reach new heights. 

There are now 1 million job openings in Canada, continuing evidence that employers are having a hard time finding workers. This represents 6% of all jobs, which is up year-over-year from 3% last December. Employers getting hit the hardest are the ones in food services and hotels, with job vacancies in those sectors at 14.4%. According to data compiled at the University of Waterloo, there are now 0.8 vacancies for every job seeker in the country – the highest proportion since 2015 and twice the average of 0.4 over that period. Still, Canada continues to lag behind the U.S., which has 1.4 job vacancies for every searcher.

Oil prices are getting pummeled with benchmarks down more than 5% as a new Covid-19 strain sparked fears about a decrease in travel and potential new lockdowns, both of which could hit demand just as supply is about to increase. OPEC+ is set to meet on Dec. 2 to discuss production policy for January and beyond. At the time of writing, NYM WTI Crude futures are down –5.40% to US$74.15/bbl and ICE Brent Crude futures are down –5.11% to US$78.05/bbl.  

Our Takeaways:

With the markets in a clear state of flux, we continue to encourage investments into stable blue-chips with dividends (as said by Capt. Obvious). While this might sound like obvious advice, trends tend to focus on tech stocks that continue to get a lion’s share of the attention, though volatility and a market melt up indicates that this is not a prudent move. Instead a focus on stable, well-valued companies with good price-to-earnings will long-term win out – and with fewer heart attacks.

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