The global coronavirus pandemic has resulted in some rather incredible downside moves the likes of which I don't think many investors saw coming.
For Canadian companies in the energy and financial sectors, this drop was even more pronounced than in other locales globally. The question which is on the minds of many Canadian investors is: when will the pain stop?
The reality is, at this point in time, I’ve become even more bearish on these Canadian sectors than before because I don't see a clear pathway to grow through these sectors at all for at least the next five years. There are a few negative catalysts I think may be too strong for Canadian companies or governments to combat.
For energy stocks, I don't see a realistic pathway for global long term production consensus among the Organization of the Petroleum Exporting Countries, Russia and North America.
These obvious geopolitical issues won't resolve themselves easily or without paying for North American producers. Canada is simply too small a producer to matter in global production talks. So there really is no sway the Canadian government can have on improving all prices for Canadian heavy oil producers who are price-takers.
This energy sector weakness is likely to have a spillover effect for financials companies in Canada, that have open lines of credit in the oil and gas sector.
These concerns only multiply the other issues lenders will undoubtedly have in a recessionary environment, as delinquencies and bankruptcies skyrocket from a Canadian consumer base, which is heavily indebted and highly sensitive to economic shocks. I expect this weakness to last for years, so don't rush in.
Invest wisely my friends.
