The weekend before last I decided it was time to spend some of our family’s increased savings generated over the lock-down on building a new backyard deck. With the help of my dad, we completed the project in a few days but learned something very interesting during the process.
After being cooped up for so long, we were apparently not alone in our decision to spend some money as the COVID-19 restrictions began to lift and the nice weather started rolling in.
For example, the Rona and Home Depot stores were jam packed — so much so that one of the stores we visited had to hire five additional staff on top of their pre-virus levels to deal with the demand. When it came to finding a patio set, I had to beg the store manager to sell me the floor model that was set up that morning, given every set at nearly every store across all of Calgary were sold out in a few days.
RV and campers sales are setting new records, and good luck getting a hot tub or swimming pool set up this summer
I have heard the same thing has been happening in other segments of retail: bike inventories are being blown out, RV and campers sales are setting new records, and good luck getting a hot tub or swimming pool set up this summer.
The rebound has come as economists and market pundits have been warning of the risks of a long-lasting recession, with some even calling for a Great Recession or depression given all of the job losses. At the same time, however, markets were already pointing toward a recovery, leaving many wondering why the dichotomy.
Then on Friday jobs numbers blew past expectations. In Canada, 290,000 jobs were added in May compared to expectations for a 500,000 drop. Interestingly, a whopping 79 per cent of the job gains were concentrated in one province — Quebec.
South of the border, U.S. non-farm payrolls showed a gain of 2.5 million jobs in May, blowing past Wall Street estimates of an 8.3 million decline. Leisure and hospitality represented nearly half of the gains and also showed a significant drop in the number of workers who were temporarily laid off.
Not surprisingly, equity markets rocketed immediately following the news and this time it was across the board not just the FANG stocks. When drilling a bit deeper perhaps the market was on to this early surge in spending as stocks such as Walmart, Lowes and Home Depot are now up 2, 8.5 and nearly 16 per cent this year, respectively.
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That said, during this euphoric rush back into the economy, which in hindsight is understandable after being locked inside for so long, it is important to remember that there remain some risks on the horizon especially once the initial pent-up spending starts to dissipate.
Therefore, we think now is not the time to get caught into the classic FOMO (fear of missing out) whether it be in your monthly budget or your investment portfolio. A little bit of patience and some dry powder will go a long way if the government cheques and consumer spending do not bring us back to where we were economically prior to the shut-down.
Personally, I took advantage of all of this spring euphoria by selling some items that nearly covered the entire cost of the deck materials including that floor model patio set which I successfully talked Rona into selling me. As a result, I didn’t put a dent into the savings I accumulated over the past few months.
We can’t help but wonder if perhaps the same strategy couldn’t be deployed with your investment portfolio by rebalancing among sectors, stocks and bonds into this FOMO market recovery. Like my deck, a great first step is to map out the project and identify ways to add value in a cost-effective manner.
Martin Pelletier, CFA, is a portfolio manager at Wellington-Altus Private Counsel Inc. (formerly TriVest Wealth Counsel Ltd.), a private client and institutional investment firm specializing in discretionary risk-managed portfolios, investment audit/oversight and advanced tax and estate planning.
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