Stocks Plunge Heading Into Weekend

If you tuned out of the market at noon, you should check your portfolio again. After a calm morning, traders around the world decided that they need to risk-off for the weekend. You can understand the logic: two days is approximately twelve and a half years in today's market. Remember that it wasn't long ago that the Fed met on a Sunday to cut rates to zero.

Here's the Dow's performance today:

Source: Bloomberg, March 20th

A positive morning, relaxing to neutral at lunchtime, before falling 913 points (or 4.5%) before the close. With volatility as high as its been for the last few weeks, taking your money off the table before the weekend makes a lot of sense.

Airlines Start Cutting Costs Aggressively

Air Canada had a positive day, finishing up 2.1%, after laying off 5,000 flight attendants. This pandemic is a perfect storm for flight attendants, whose job lies at the intersection of the service and aviation industries.

Delta Airlines had a roughly neutral day, finishing down 0.2%, and announced its path forward after the close: the airline has entered into a $2.6B secured credit facility and suspended further buybacks and dividends. Those moves give a much-needed infusion of liquidity and a equally-needed cut to cash outflow.

Cutting dividends is a both a financial and political play, as dividends and buybacks have become something of a political football for companies seeking bailouts. Buybacks and dividends are perfectly valid means of returning value to shareholders, but the "our only responsibility is to our shareholders" argument goes out the window when you ask for a bailout.

Our Outlook

If the last few weekends are any guide, history will repeat itself and the following will happen in the next 96 hours:

• Some crazy weekend news: COVID-19 related or not. Trump nationalizes the cruise lines. Jerome Powell becomes a Tampa Bay Buccaneer. Joe Biden is missing. The penguins have taken over the Chicago zoo. 

• Dramatic fall on Monday: Dow falls off a cliff. Comparisons to the 1987 Black Monday market crash are in every investor letter. 

• Rebound on Tuesday: modest return to form on Tuesday, although not nearly enough to recover the last few weeks' losses.

This is the part where we remind you that past performance is not indicative of future results. This is just the pattern of abuse we've begun to recognize.

We are still encouraging clients with comfortable cash positions to consider investing in large, dividend-paying stocks, and we'll continue beating that drum until dividend yields start making sense. At market close today, an all-cash portfolio of the Big 5 banks plus Bell and Enbridge was yielding 6.84%.

If you'd like to talk about these events or discuss your portfolio, don't hesitate to reach out to us at 604.643.0101.

Disclaimer: Canaccord Genuity Corp. is a member of the Investment Industry Regulatory Organization of Canada (IIROC) and Canadian Investor Protection Fund (CIPF). The comments and opinions expressed in this commentary are solely the work of the Cash Management Group and Andrew Johns.