Juggling Dynamite

Historically, when the S&P 500 has fallen 10% and the yield on the 10-year U.S. Treasury bond has declined 50+ basis points, the U.S. economy has been heading into recession about 70% of the time. We reached both milestones in March. The economically sensitive small-cap Russell 2000 index is down 17% since last November, and Canada’s resource and financial-centric TSX is down 6% since December 6, 2024.

It’s worth noting that the average stock market decline during past recessions has been 30%, and 34 to 86% when valuations begin from extreme highs, as in 1929, 1973, 1999, 2007, 2020 (below) and now.

While official unemployment rates are still not far above cycle lows, credit delinquency rates (90+ days late) are already near their highest levels in 20 years.

The recent University of Michigan Sentiment Survey registered the greatest level of pessimism on personal finances ever recorded–worse than 2008. Just let that settle in a minute.

Knock-on risks intensify with age. As of early 2024, individuals 55+ held approximately 80% of all stocks, a significant increase from 60% two decades ago.

Everyone hates to see their portfolios decline, but capital loss later in life is harder to recover emotionally, psychologically, and financially. Losses while needing to withdraw for living expenses can severely reduce the longevity of savings and the likelihood that portfolios never fully recover — a scenario known as sequence of return risk. Outliving one’s savings remains among the top retirement fears.

As the economy and employment contract from here, central banks will continue easing efforts, but inflationary fears around tariffs may slow the pace and degree, at least in the near term.

For those who hope coming cuts are bullish for risk assets, it bears noting that the bulk of price declines have always come while the Fed is easing, not before.

It’s hard to imagine how damaging ice storms can be without witnessing them. After six decades of living in the north, this experience was a first for me. Big trees become weapons of mass destruction. There’s still no power or internet in our area. After a full day of sawing, cutting, and dragging tree parts, we are ready for the woodchipper at our house. Many are still buried in debris.

Hundreds of thousands of people remained without power and schools were closed in some areas on Monday morning after many Ontario locales were hit by freezing rainstorms over the weekend. According to Hydro One’s power outage map as of Monday morning, there were still widespread power outages in a stretch of the province extending from Grey-Bruce to the Quebec border that the company services. More than 390,000 homes and businesses were without power. Well over 532,000 others have also had their power restored since the storm began, according to Hydro One. Hydro One estimated that some of the areas may not see power restored until Tuesday or Wednesday. Here is a direct video link.

This weekend’s ice storm hit hard. Since Saturday, we have relied on a generator and intermittent cell service. We’re the lucky ones in that only our yard was decimated by crashing trees. Many people sustained direct hits to their homes. It looks like a war zone. Fortunately, warm air has melted the assailing ice sheets this morning.

At the moment, I have a couple of bars to hotspot off my phone, so I’m taking the opportunity to share a worthwhile discussion on the complexity of discerning “Made in Canada” goods. Happy Monday, March is kicking hard on the way out.

With the erratic threats of Trump’s tariffs, many Canadians are switching to “Made in Canada” products. But in today’s market, what does “Made in Canada” mean? How much of anything we buy is made right here in our country? Despite the highly integrated economy that Canada and the U.S. share, can we become more self-reliant by shifting all production to our home and native land? Jim Stanford, economist and Director of the Centre for Future Work; Vass Bednar, executive director of the Master of Public Policy Program at McMaster University and host of the “Lately” podcast; and Jim Hinton, owner and founder of Own Innovation and a Senior Fellow at CIGI, the Centre for International Governance Innovation, join Steve Paikin to discuss what it takes to make more in Canada. Here is a direct video link.