A dreadful Monday in the markets has put more fear into investors who have been fleeing equities in droves. But the drop in stocks has opened up a wealth of buying opportunities, too, says investment manager Lorne Steinberg, who claims that for those out there with the money to spend, now is the time to be snapping up the bargains.
It was the worst day for US stocks since the 2008 financial crisis and the worst day for Canadian equities since the crash of 1987. Trading was temporarily halted in US markets and the TSX closed down 10.3 per cent in response to the ongoing coronavirus outbreak and a sudden drop in oil prices.
Some of the big tech names got hit hard, as well, with Apple falling 7.9 per cent for the day, while Microsoft, Facebook and Alphabet all dropped more than six per cent.
Canadian names Shopify and BlackBerry lost ten and 11 per cent, respectively.
It’s anyone’s guess how much deeper the downturn will go as the economic fallout from the coronavirus crisis is still evolving, leading some to put 2020 in negative growth
Of course, the grim news comes with the silver lining that many of those names you might have thought were looking too expensive a couple of weeks ago are now more appealing. Steinberg says you need to take up the opportunity.
“I've always said when there's maximum fear and uncertainty. Those obviously create the best opportunities but it's toughest to step in. So we simply chip away on a daily basis,” said Steinberg, president of Lorne Steinberg Wealth Management, appearing on BNN Bloomberg Monday.
“We’re investing not with a five-day time horizon but with a five-year time horizon. And so we still have significant cash. We need to buy things when they're on sale, and some things aren't down a lot but some things are offering massive opportunities and we need to be there,” he said.
The recent flight from equities has caused bond yields to shrink considerably, with the Canadian 10-year yield falling to 0.225 per cent on Monday. Key interest rates have been lowered by central bankers worldwide including the Bank of Canada in effort to staunch the bleeding, but Steinberg says those moves will likely prove ineffective.
“I think that was a total waste of time and a misfire by the Bank of Canada because they achieved zero except now they have fewer arrows in the quiver in case we really need them,” Steinberg said. “And this time around investors are not reacting at all to the lower interest rates — they’re if anything hoarding cash. And that’s what’s creating some opportunities here.”
“There's just this massive flight to safety where everybody seems to be loving short-term government paper or long-term government paper — even the 30-year yield is incredibly low,” says Steinberg. “And it's not a question of inflation. People are just saying get me out, sell everything and buy me some safety.”