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​COVID-19, Market Conditions, And What You Need To Know

Thanks to everyone who attended our webinar on COVID-19 and the current market conditions. For those of you who missed it, we encourage you to watch the replay. Keep reading for some insight on what was discussed. 

FirstOntario Credit Union's business and wealth leaders joined NEI Investments, Canada's leader in responsible investing – to talk about the impact recent volatility has had on the markets and what that could mean for opportunities and challenges ahead. They also discussed how responsible investing can help to reduce portfolio volatility and set the stage for success in the post COVID world. 

Here’s a great question we weren’t able to get to during the webinar. Thanks to Yufei for providing the answer. 

I don't know how governments will pay for the massive spending increases without resorting to higher taxes. Do you have an opinion?

Yufei Man:

This problem won’t be addressed in the near-term, as policymakers focus on keeping the economy afloat. In response to COVID-19, debt levels are rapidly rising and I don’t think anyone has a good solution at this point. That said, I’ll offer some perspectives:

  1. Regarding taxes: I don’t know what will happen, and whether they go up or down really depends on who we vote into office. Taxes don’t necessarily have to increase, we could just go into further deficit. Canada has one of the strongest balance sheets in the developed world with a solid AAA rating. Canada has the lowest government net debt/GDP ratio amongst the G7. In a response to a crisis of this magnitude, we can simply afford to increase our net debt burden. 
  2. It does help that interest rates are very low so the cost to service the additional debt is also relatively low. A 30-year Government of Canada bond only pays about 1.17% right now. It was double that less than a year ago. This is one of the reasons globally, bond yields are likely to stay low, for longer. This will naturally create return challenges for bond investors, who will have to look into investment funds/strategies beyond the traditional “buy-and-hold” approach.

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