The coronavirus pandemic has had a devastating impact on Canada. At the time of this writing, the virus had infected more than 65,000 people in the country and had killed more than 4,000. It has also severely impacted the economic well-being of the nation. Not only have millions of Canadians lost their jobs, but there have also been dramatic swings in the local stock market.
This article describes how the pandemic has affected the stock market as well as other important markets in the country.
The Stock Market
While news of the turmoil in North American financial markets has focused mostly on the major exchanges in New York, the virus has also greatly affected the Toronto Stock Exchange (TSX), which is the ninth largest stock market in the world. It also has more oil and gas companies listed on it than any other stock market, making it particularly vulnerable to the collapse in energy prices that has followed the onset of the pandemic.
The S&P/TSX Composite, which is considered the headline index for the Canadian equity market, started off the year well. On February 20, it was at 17,944.06, which represented a 5.2% increase from the beginning of the year. Then, the virus sent it, along with all the world’s other financial markets, crashing downward. One month later, on March 23, the S&P/TSX Composite was at 11,228.49. This represented a dramatic fall of a 37.4%.
However, there is reason for optimism. In late March, the TSX began to rebound, much like stock markets did elsewhere. Then, in April, it steadily grew, with the composite index rising from 13,378.75 to 14,780.74. This represented a whopping 10.5% increase for the month, which was one of the best months that it has had in years.
So, while the Canadian stock market is still down for the year by a considerable amount, it is moving in the right direction. This should give hope to stock investors going forward, especially those investing in non-energy stocks, though they still need to be cautious.
Oil and Gas Markets
The oil and gas industry is a major component of the Canadian economy, accounting for more than 10% of the nation’s gross domestic product. So, it has been especially hard hit during the pandemic, as the prices of fossil fuels have plummeted due not only to the shuttering of production facilities across the world but also because of the lack of travel.
Things got so bad that, at one point in April, the price of oil actually fell below zero.
But like with the stock market, there is reason for at least some optimism. The Canadian government is spending C$2.5 billion to prop up the energy industry, which experts believe will save 10,000 industry jobs. The price of oil has been rising, too, albeit sporadically and with lots of volatility. It even rose 50% over the course of 3 days in late April. Don’t worry if you were unable to find work as a result of the pandemic; we’ve got your back! Here are some of the jobs that are in great demand in Canada as a result of Covid-19.
The Housing Market
Like with other markets in the country, the coronavirus pandemic has adversely affected the Canadian housing market. While prices so far have been stable during the crisis, largely due to generous government support programs, experts believe the market is essentially a ticking time bomb. They think that the pandemic could eventually cause housing prices to fall as much as 15% in the next few years.
A big part of the reason is that Canadians, in comparison to many other developed nations, carry a lot of consumer debt. Household debt-to-disposable income in the country is at 176%. This, combined with high employment, will likely eventually send the market into a tailspin, especially as government support programs will only last so long.
Decreases in prices are expected to be felt most in the oil-producing sections of the country while those living in the Toronto metropolitan area should expect the most stability.
Of course, if the pandemic ends soon and the economy quickly rebounds, housing prices will likely rebound with it.
As in other countries across the world, the coronavirus pandemic has caused tremendous volatility in Canadian markets. But, just as the outbreak of the virus has stabilized recently in the country, there is good reason for having optimism that most markets will stabilize as well.