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Kim Parlee recaps the biggest news of the day including the latest COVID-19 developments, followed by a conversation with Brad Simpson, Chief Wealth Strategist, TD Wealth about how to pull yourself away from your fears, get a broader perspective and make reasonable decisions.
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[MUSIC PLAYING]
KIM PARLEE: Hello, everybody, and welcome to the Money Talk COVID-19 Daily Bulletin for Thursday, March 20. I'm Kim Parlee. In a few moments, we're going to be talking with Brad Simpson-- he's the Chief Wealth Strategist at TD Wealth-- on this volatile market, and talking about how-- whether your mind is ruling your emotions, or are your emotions ruling your mind? Easier said than done in this market, and Brad's going to speak to that.
Well, first, to wrap up a few of the day's news points, first, we're hearing that the Canadian federal government is going to be putting in place a mobilization plan as the new Canadian industrial strategy, which is going to help Canadian manufacturers shift to produce goods for the COVID-19 emergency. Air Canada has announced the temporary layoff of more than 5,000 flight attendants until at least April 30. China has recorded no new domestic infections for a second day.
Meanwhile, California has ordered a lockdown for the state's 40 million residents, except for essential needs. And New York has also, by executive order, said all nonessential workforce must stay home. They have said as well, at the same time, that testing has ramped up to levels we're seeing in South Korea, which is good news.
The IRS is moving its US tax filing deadline to July 15. Canada has already moved that deadline from April 30 to June 1. And we're also hearing that a team in Seattle is getting funding right now to start human trials for a potentially groundbreaking COVID-19 treatment, which is currently being used in clinical trials for certain types of cancer. So that is the round-up of the news.
So as I mentioned, there's a lot of news going on. It makes it especially hard to not have your emotions rule your mind. But Brad Simpson, the chief wealth strategist at TD Wealth, is here to talk to us about what he is thinking. And he's just put out a report, and he's got five big points that the report makes. Brad, the first one that you make is that the measures that are in place are working.
BRAD SIMPSON: Yeah, take China, for example, that, thanks to the quick action by the government there and the strict measures that were put in place, the rate of cases has slowed to a trickle. And workers in the outbreak epicenter, of Wuhan, have been told to go back to work. And so one of the things I think is a really good sign with this is that, when you look at the place where this began and measures that were put into place, the further you get away from it, you're starting to see a really positive impact.
KIM PARLEE: Yeah, totally agree. The second point you bring up here is to watch out for your amygdala to hijack how you're thinking and what you're doing.
BRAD SIMPSON: Yeah. Fear, actually, can be a fairly prudent thing in the right doses. We know that that fear is what leads us to, ultimately, sit back and build investment portfolios that are based on diversification principles. And so that's a positive notion, taking something and using it positively.
The other part of this, though, is that you could go back in our evolution over a long time. We have this area of our brain that was developed when we used to live in caves. And when we were alerted to danger, this amygdala sends a response to our system that said, run! And in times of extreme fear, when you're getting physically challenged, that makes a lot of sense. But boy, the financial challenge can be unbelievably costly.
Right now, we see really erratic markets today, where risk-oriented assets are being sold at fireside prices. And these prices aren't being set in a rational way. And so that, I think, is really important for us to keep in mind, is that one of the greatest tools we have going for us right now is our ability to actually control the space between our ears and be reminded of that saying, at the end of the day, it's the frontal cortex of your brain that's more of the senate of your brain that you've got to be listening to here.
KIM PARLEE: Mm. Let me ask you-- and you and I have talked about this a couple times. The third thing you highlight is that this is an event-driven bear market as opposed to a different kind of bear market.
BRAD SIMPSON: Yeah, we think there's three types of bear markets. And the first two are very much based on the structure of the economy and the structure of the system itself. And they tend to be really painful and really long. And event-driven is from outside sources. And one of the things is that they have dramatic declines, like we've seen. And on average, these event-driven bear markets see average declines of 29%. We're there.
And typically, they last nine months or so, looking out to the recovery period. And the reason they, typically, are so quick is because of external-- the market goes through the pain very quickly, but the reaction to it is usually really swift. And that's what we're seeing right now. So as hard as it is to say this, or to hear this, is that if you were going to have a bear market, this is the kind you'd actually want to have.
KIM PARLEE: Yeah, yeah. We talked about this. This is a cavity, not a root canal. There's my dental analogy.
BRAD SIMPSON: Nice, nice.
KIM PARLEE: Let me ask you-- and I highlight this in the news that I said, and this is your fourth point, policy makers are on this. Whether it's fiscal or monetary, you see the huge amount of collaboration between governments around the world trying to make this work.
BRAD SIMPSON: Yeah, look. That I thought your comment and even an update, is that there's so many policies being put in place by central banks, and fiscal policies being put in place by governments around the world right now. It's actually incredibly difficult just to keep up with the announcements.
So I kind of focus on, most importantly, is that, right now, in the financial system, is-- the critical part is, look at the financial system almost like a biological body, if you will. And it needs circulation. And that circulation in the financial market is capital. It's money-- what we call liquidity.
And so the key ones right now that we're doing is that there has been, by the Federal Reserve Board-- a commercial paper funding facilities have been set up. This has going back to the 2008 era. A critical one that was done the other day, which is the primary dealer credit facilities-- and these are kind of the key hubs of making sure that these systems continue to get the capital that they're going to need.
And so these, among other measures, should really go to support the economy, alleviate the funding pressures that are in the funding markets today, which is the stuff we're really looking at. And we're going to see more announcements over the coming days where central banks will make more of these type of announcements.
And they're incredibly positive in that they're almost like taking a defibrillator to the system, and you just keep hitting it to make sure it keeps moving. And that, ultimately, is what we need to see. And there's no magic to this. The underlying damage of COVID-19 is going to have an impact with tighter financial conditions here for a while. But the responses that we're seeing are also going to provide a lot of downside production.
KIM PARLEE: I've got about 30 seconds, Brad, and I think this is one of the most important things. But you've got a rule here called the 10-10-10. What is it?
BRAD SIMPSON: Now, the 10-10 rule really comes down to this really, really simple idea, is that, when you're looking at this, how are you going to feel about this in the next 10 minutes? There's going to be times in the coming days that you're going to feel pretty awful. How do I feel about this in 10 months? I think we're going to be in a very different place 10 months from now, and I think that our investment portfolios are going to look that way.
And how am I going to feel about this in 10 years? I think that if you would have told me, in the throes of this in 2008, that I would have felt this positive and looked at how financial markets were in 2018, you wouldn't have believed it. So I think when we look back at this from 10 years from now, this will have very different context than it does today.
KIM PARLEE: Thank you so much, Brad, for your time. I know you're very busy right now. Everyone, that's Brad Simpson, Chief Wealth Strategist at TD Wealth. And thank you for listening for those who are tuning in. And be well.
[MUSIC PLAYING]
KIM PARLEE: Hello, everybody, and welcome to the Money Talk COVID-19 Daily Bulletin for Thursday, March 20. I'm Kim Parlee. In a few moments, we're going to be talking with Brad Simpson-- he's the Chief Wealth Strategist at TD Wealth-- on this volatile market, and talking about how-- whether your mind is ruling your emotions, or are your emotions ruling your mind? Easier said than done in this market, and Brad's going to speak to that.
Well, first, to wrap up a few of the day's news points, first, we're hearing that the Canadian federal government is going to be putting in place a mobilization plan as the new Canadian industrial strategy, which is going to help Canadian manufacturers shift to produce goods for the COVID-19 emergency. Air Canada has announced the temporary layoff of more than 5,000 flight attendants until at least April 30. China has recorded no new domestic infections for a second day.
Meanwhile, California has ordered a lockdown for the state's 40 million residents, except for essential needs. And New York has also, by executive order, said all nonessential workforce must stay home. They have said as well, at the same time, that testing has ramped up to levels we're seeing in South Korea, which is good news.
The IRS is moving its US tax filing deadline to July 15. Canada has already moved that deadline from April 30 to June 1. And we're also hearing that a team in Seattle is getting funding right now to start human trials for a potentially groundbreaking COVID-19 treatment, which is currently being used in clinical trials for certain types of cancer. So that is the round-up of the news.
So as I mentioned, there's a lot of news going on. It makes it especially hard to not have your emotions rule your mind. But Brad Simpson, the chief wealth strategist at TD Wealth, is here to talk to us about what he is thinking. And he's just put out a report, and he's got five big points that the report makes. Brad, the first one that you make is that the measures that are in place are working.
BRAD SIMPSON: Yeah, take China, for example, that, thanks to the quick action by the government there and the strict measures that were put in place, the rate of cases has slowed to a trickle. And workers in the outbreak epicenter, of Wuhan, have been told to go back to work. And so one of the things I think is a really good sign with this is that, when you look at the place where this began and measures that were put into place, the further you get away from it, you're starting to see a really positive impact.
KIM PARLEE: Yeah, totally agree. The second point you bring up here is to watch out for your amygdala to hijack how you're thinking and what you're doing.
BRAD SIMPSON: Yeah. Fear, actually, can be a fairly prudent thing in the right doses. We know that that fear is what leads us to, ultimately, sit back and build investment portfolios that are based on diversification principles. And so that's a positive notion, taking something and using it positively.
The other part of this, though, is that you could go back in our evolution over a long time. We have this area of our brain that was developed when we used to live in caves. And when we were alerted to danger, this amygdala sends a response to our system that said, run! And in times of extreme fear, when you're getting physically challenged, that makes a lot of sense. But boy, the financial challenge can be unbelievably costly.
Right now, we see really erratic markets today, where risk-oriented assets are being sold at fireside prices. And these prices aren't being set in a rational way. And so that, I think, is really important for us to keep in mind, is that one of the greatest tools we have going for us right now is our ability to actually control the space between our ears and be reminded of that saying, at the end of the day, it's the frontal cortex of your brain that's more of the senate of your brain that you've got to be listening to here.
KIM PARLEE: Mm. Let me ask you-- and you and I have talked about this a couple times. The third thing you highlight is that this is an event-driven bear market as opposed to a different kind of bear market.
BRAD SIMPSON: Yeah, we think there's three types of bear markets. And the first two are very much based on the structure of the economy and the structure of the system itself. And they tend to be really painful and really long. And event-driven is from outside sources. And one of the things is that they have dramatic declines, like we've seen. And on average, these event-driven bear markets see average declines of 29%. We're there.
And typically, they last nine months or so, looking out to the recovery period. And the reason they, typically, are so quick is because of external-- the market goes through the pain very quickly, but the reaction to it is usually really swift. And that's what we're seeing right now. So as hard as it is to say this, or to hear this, is that if you were going to have a bear market, this is the kind you'd actually want to have.
KIM PARLEE: Yeah, yeah. We talked about this. This is a cavity, not a root canal. There's my dental analogy.
BRAD SIMPSON: Nice, nice.
KIM PARLEE: Let me ask you-- and I highlight this in the news that I said, and this is your fourth point, policy makers are on this. Whether it's fiscal or monetary, you see the huge amount of collaboration between governments around the world trying to make this work.
BRAD SIMPSON: Yeah, look. That I thought your comment and even an update, is that there's so many policies being put in place by central banks, and fiscal policies being put in place by governments around the world right now. It's actually incredibly difficult just to keep up with the announcements.
So I kind of focus on, most importantly, is that, right now, in the financial system, is-- the critical part is, look at the financial system almost like a biological body, if you will. And it needs circulation. And that circulation in the financial market is capital. It's money-- what we call liquidity.
And so the key ones right now that we're doing is that there has been, by the Federal Reserve Board-- a commercial paper funding facilities have been set up. This has going back to the 2008 era. A critical one that was done the other day, which is the primary dealer credit facilities-- and these are kind of the key hubs of making sure that these systems continue to get the capital that they're going to need.
And so these, among other measures, should really go to support the economy, alleviate the funding pressures that are in the funding markets today, which is the stuff we're really looking at. And we're going to see more announcements over the coming days where central banks will make more of these type of announcements.
And they're incredibly positive in that they're almost like taking a defibrillator to the system, and you just keep hitting it to make sure it keeps moving. And that, ultimately, is what we need to see. And there's no magic to this. The underlying damage of COVID-19 is going to have an impact with tighter financial conditions here for a while. But the responses that we're seeing are also going to provide a lot of downside production.
KIM PARLEE: I've got about 30 seconds, Brad, and I think this is one of the most important things. But you've got a rule here called the 10-10-10. What is it?
BRAD SIMPSON: Now, the 10-10 rule really comes down to this really, really simple idea, is that, when you're looking at this, how are you going to feel about this in the next 10 minutes? There's going to be times in the coming days that you're going to feel pretty awful. How do I feel about this in 10 months? I think we're going to be in a very different place 10 months from now, and I think that our investment portfolios are going to look that way.
And how am I going to feel about this in 10 years? I think that if you would have told me, in the throes of this in 2008, that I would have felt this positive and looked at how financial markets were in 2018, you wouldn't have believed it. So I think when we look back at this from 10 years from now, this will have very different context than it does today.
KIM PARLEE: Thank you so much, Brad, for your time. I know you're very busy right now. Everyone, that's Brad Simpson, Chief Wealth Strategist at TD Wealth. And thank you for listening for those who are tuning in. And be well.
[MUSIC PLAYING]
