Hello everyone my name is Clément Gignac
Senior VP and Chief Economist for iA Financial Group.
So over the next five to seven
minutes I will try to talk about this market
turmoil and this ongoing recession, which already
started from my point of view, and what
we can do about that. Okay so usually I
start with a big picture and after that
I go with the investment conclusion,
given the big picture. You know what,
as opening remarks I would start with
the opposite: what can we consider
in the last three months, or even
last Monday we had a 12% decline in 
one single day--it was the worst sell-off
in Wall Street ever since 1987.
It was in the top three as a matter of
fact since the thirties. 
So make no mistake: this is not the
first time we've had a correction.
We have seen a correction of 10% plus 33 times
since 1950, but a bear market more than
20% has happened only 11 times
in the past (now is the 12th one). And in fact
usually it's over many weeks and months,
but this time, only 23 days of trading
session and whoops! we have a bear market
and now we have reached, as we speak, in fact -
recently minus 28, minus 30 percent, usually
it's associated with recession. When you
have a recession it's around 30, 25 percent.
When you have a crisis like 2008
it's more than 50 percent. So what can we
do, what's going on and are we heading into
a recession? Okay, make no mistake: yes, we have
started a recession, but you know, a recession
is not a depression, it's a contraction of
the economy. It could last maybe for
three, four, or six months depending on if we
find very soon a vaccine for the
coronavirus. And that depends on the
reaction of policymakers as well.
Of course, that would have an influence.
Yes, companies will be hurt with their
profits and so on but you know what
at some point we will find a vaccine
and the sun will rise again.
So yes, central banks do their best, but
the central banks are not really the
solution. That helps! That provides liquidity.
You have noticed that now they have released
the capital buffer for the banks.
In 2008, 2010, I had the 
privilege myself to work in the G20
with Mr. Flaherty. We had to fix the
financial system, which was broken.
This time the financial system is not
broken, it's basically like a 9/11 or earthquake.
So we have to do something to 
take care of the workers
who are temporarily off to be sure they
have revenue so they can go buy groceries.
And we have to support the
workers who are temporarily off and
for the people as well who are affected
by the coronavirus. So you know, yes they
have increased the interest rate but do not
underestimate, excuse me,
what in fact the policymakers could do.
I have worked, as mentioned, in the Finance
department and I know they have all these
tools in the G7, and now the consultation
has already started. In fact they had a
conference call with the G7 leaders last
Monday and now they are trying to coordinate an
action to inject a lot of cash into the
system.
Yes, not only the central banks, but people also
receive cheques directly. So I think that
you will see some announcement from Mr. Morneau and
Mr. Mnuchin and, clearly they are different,
the assumption, I'm not a crystal ball exactly
but I can tell you what I recommend 
is to send money directly to
the workers who are temporarily off to
support their revenue. Because if
they have no revenue you will go to a
big depression. So these people have
expertise, they have learned about the
crisis, how to avoid a crisis like 1930,
and they have all the tools 
available to do that. So usually a
Finance Minister will go with
the parameters and what is my
[inaudible] to stimulate the
economy. This time, forget the deficit.
Canada will be maybe, down the road 80, 100 billion deficit
for 5% of the GDP. And the U.S. is already at 4%
annual GDP. So maybe we'll go to 8 or 10 percent.
So the top priority is not the deficit,
it's to be sure that people can
be there when the economy starts up
again when we find a vaccine. So
you need the airline company to still be
there, the cruise boats to be still
there and you need to have some workers to
support that. But don't be surprised in
the meantime that you will have maybe a
break for mortgage payments. So for
people losing their jobs, I will not be
surprised if they announce that they
will have a break, postponed by three
months or six months, for any payments. So make no
mistake, the debt does not disappear, but you
will have a break on this one. Maybe they
will cut temporarily the GST, for example,
in Canada to encourage people to spend.
For people like me and people watching
me who have their jobs, we have to
encourage them to accelerate their spending and
maybe their intention to go and buy tickets,
big ticket items, excuse me, that
will support a lot of jobs. So do not
underestimate the capacity of
policymakers to support. What about the
market? You know what, the market will
take care of itself.
The reason it went up so fast is maybe due
to the quants, the algorithm,
and now we have no longer have
brokers and banks that really support,
contrary to the previous decades, so we
have to make up our own judgements. If we
have to stop all transactions for
three days so that people take a break, just
like 9/11, they closed the stock markets for
three days. That would cause a lot of
inconveniences so this is not their first
choice, I think they will remain open. But be
careful before thinking that this will be
a depression and it's over. So my
recommendation, you know what, take care
of yourself, take care of your family--it's the
top top priority, of course--and have a longer
time horizon. You know, when you're in the
stock market, it's not to buy a car in the
next six months or a condo, it's because
you have financial planning for 
your RRSP and your retirement.
So when you have a longer
time horizon, it's very unusual that you lose money
when you have a three-, four- or five-year time horizon.
And when you have only
three months or three days, who knows, I'm not a guru.
So for me, when I see that the banks,
for example, have a good balance
sheet, a good dividend yield, in fact a
four or five percent return or dividend yield,
and the bonds were for 0.5 if
you have more a three- or five-year time horizon, 
you know what, I think that I
prefer the banking stocks, they will not
fail in my point of view, because all
the regulators and central banks have
mentioned loud and clear in the past few
years that the banking system is very
resilient to any recession. So they will
take care to be sure that the banks will
still be there because we need them for
the economy. But we need to support
the workers and this is their top
priority. So make no mistake, this is
uncharted territory what we are 
experiencing recently. I'm not a doctor,
I don't know when the vaccine will be found,
but I'm sure the sun will rise again.
I'm sure we will be able to fly again
and you will have a cruises for people who
like to go on cruise boats. So this is
my advice but since each of us is
different, has a different time horizon,
risk tolerance, I really encourage you to
sit with your advisor and discuss that. 
I'm hoping that this little video gives
you food for thought and I'm there to support
you. So Clément Gignac here for iA Financial Group.
Food for thought, have a good day.
