Globe editors have posted this research report with permission of Canaccord Genuity. This should not be construed as an endorsement of the report’s recommendations. For more on The Globe’s disclaimers please read here. The following is excerpted from the report:
The year 2020 has thus far brought the unexpected, with the COVID-19 pandemic sparking economic shutdowns across many regions and countries. This has led to unprecedented volatility in the equity markets, with the S&P/TSX Composite index falling 38 per cent from February 20 to March 23 and rebounding 26 per cent in the three weeks following. Such a sharp market decline followed by an accelerated rally – and particularly in light of the current drivers – is essentially uncharted territory. Therefore, given the uncertainty surrounding the length of time and potential scale of economic disruption caused by COVID-19, it is difficult to ascribe a previous playbook to the current market environment.
While a material decline in corporate earnings in Q2/20 appears inevitable, the length and depth is unknown. What is clear is that governments around the world have expanded their balance sheets and demonstrated a willingness to provide a lifeline to struggling economies, at least over the near term.
Our best picks for an offensive or a defensive strategy
In this report, we are not attempting to make a call on the overall direction of the equity market; we’ll leave that up to our outstanding Portfolio and Technical Strategist teams. Instead, our conversations with investors suggest a split between those who believe a bottoming process has been completed and we are now in recovery mode, and those who believe we will retest the March 23 low should economic data and corporate earnings disappoint over the coming months.
Our goal for this report is to provide investors, based on their own forward-looking view of the equity market, with a choice for each sector from our Canadian research coverage. Our analysts highlight offensive names to consider in a market recovery scenario, and defensive names should the impact of the pandemic prove longer and deeper than expected.
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