Belski says investors in the wider market should hang on despite the volatility
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Sep 21, 2020 • • 3 minute read
Canadian stocks cratered on Monday, amid a wider global selloff as fears over renewed pandemic lockdowns in Europe joined with uncertainties over further U.S stimulus and a deeply contested election marked by the death of Supreme Court Justice Ruth Bader Ginsburg.
The S&P/TSX Composite Index fell 225 points or 1.4 per cent to 15,971.9 points by 3:50 p.m. with energy, financial and gold mining shares leading the decline. Among energy stocks, Baytex Energy Corp. slid 7 per cent, Suncor Energy fell 4.25 per cent and Canadian Natural Resources Ltd. dropped 4.4 per cent. Teck Resources Ltd. and Kinross Gold Corp. plummeted about 7 and 6 per cent, respectively.
The S&P/TSX Capped Energy Index fell about 4.5 per cent to 67.75 points. Oil prices plunged about 5 per cent on Monday, weakening as rising coronavirus cases stoked worries about global demand, and a potential return of Libyan production bolstered oversupply fears.
The Dow shed as much as 900 points and the CBOE Market Volatility index, Wall Street’s fear gauge, shot up to its highest level in nearly two weeks. The S&P 500 ended down less than 9 per cent from its record high on Sept. 2 after paring losses that had pushed the benchmark almost into corrective territory. Tech stocks and financials led the losers with American Express AXP down 5.49 per cent and Dow Inc. 5.34 per cent less. The tech-heavy Nasdaq Composite Index shed 0.94 per cent. The index, which helped lead the wider market’s resurgence earlier this year, had fallen nearly 10 per cent this month alone.
The selloff came as the U.K. indicated it may undergo a second national lockdown, while the U.S. Congress has been deadlocked for weeks on how much more aid to add to the US$3 trillion already pledged to boost an economy rocked by the COVID-19 pandemic.
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A new aid deal may be unlikely before the November vote where a polarized electorate is confronted with how soon to replace Ginsburg. Democrats want a delay until after January’s inauguration; Republicans, down slightly in the polls, are pushing for as soon as possible. The result is key for the so-called Obamacare, as well as health-care and insurance stocks.
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Meanwhile, financial stocks were hit by reports that several large banks helped launder allegedly illegal funds since 2000 even though there had been watchdog concerns filed about the transactions.
The S&P banking subindex lost 4.5 per cent at one point before regaining losses.
“We’ve had a lot of negative news flow, investors are quite skittish, it’s part election, part COVID, part the banking stuff that hit over the weekend,” Brian Belski, chief investment officer at BMO Capital Markets, said by phone from Minneapolis. “This is a reactionary market and it’s one that’s full of conjecture and negativity so I’m not surprised that we see these types of moves in both directions, especially in a momentum-driven market.”
Nikola Corp., a maker of electric trucks, sank 18.2 per cent after founder Trevor Milton resigned as executive chairman following allegations of nepotism and fraud. General Motors Co, which said it would take an 11 per cent holding in Nikola, lost 5.7 per cent at one point before regaining.
Investors in the wider market should hang on despite the volatility, Belski said.
“The market dynamics of technology and communications services and consumer discretionary should be bought. Financials and communications services are the places to be in in Canada.”
A European travel and leisure stock index recorded its worst two-day plummet since April as holders of airline, travel and hotel shares reacted to the threat of a second round of lockdowns in the region.
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