April has been a crazy month with some markets having their best in decades while others had their worst ever. Companies are pulling their guidance and many analysts have stopped updating their estimates and guidance too.

The stock market rally is likely fueled by a number of factors:

  • Early and incredibly large amounts of stimulus
  • Short covering
  • Momentum
  • Antiviral and vaccine optimism

Risks:

  • Secondary waves of shutdowns
  • Secondary economic waves as the economic impacts become more apparent (bankrupcties, capital spending)
  • Time running out for cash reserves (personal and corporate)
  • The recovery isn’t as optimistic as hoped as more people may modify their spending habits going forward
  • US unemployment after this week’s unemployment claims is around 22%
  • Increased sword rattling between the US and China

It is difficult to say how things will go from here in the short to medium term. Personally, I think that the stock market is on the high end of valuations for what we know today however I am confident though that no matter how this works out that stocks will be higher than where they are today in seven years from now. I also think, and hope, that the economy will have to recover and that governments will begin to step away from the emergency fiscal stimulus. 

I think it is a little optimistic to think that governments will be able to raise interest rates but I hope they can do so before the next recession comes. 

I recognize that we are still dealing with the current recession however it helps to think one cycle ahead.

Many investment clients ask about budgeting and improving cash flows. As they are upgrading the management of their investments, they also realize that their ability to get their spending optimized is also beneficial.

This month I would encourage you to try a couple of different things on the budgeting front while we are all going through quarantine.

  1. Review the last 30 days of credit card entries and see what is on autopilot for recurring subscriptions. Next see what doesn’t bring you value anymore… CUT IT. Look for the small ones first, they are likely easier to cut.
  2. Look for things that you used to buy that you really don’t use today and if you didn’t have them after the quarantine is over… COMMIT TO KEEP IT CUT
  3. Look into budgeting software (at your own due diligence). I’m looking into YNAB (YouNeedABudget) and have tried the manual upload. This helps to categorize expenses and you can set a budget.

In the meantime, if you have spare capacity in your schedule I would highly recommend that you upgrade your skills through a course, book or certification provided you have the financial capacity.

Investing in yourself and/or assets that produce income are great ways to spend in a recession.

Until next time,

Trevor Dale, CFA

Disclaimer