Posthaste: Millions of Canadians are losing confidence in the stock market and plan to cash out

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Good morning!

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It’s ugly out there.

On Friday, the S&P 500 stock index fell below its mid-June low of 3,666, erasing the summer recovery. Fueled by fears of rising inflation and global recession, the flight swept bonds, energy, metals – pretty much everything but the US dollar – with it.

But when US stocks fared badly, the TSX fared even worse. Canada’s main stock index posted its biggest drop in more than three months on Friday as oil prices fell. For the week, the TSX is down 4.7 percent, down about 16 percent from its record closing high in March.

The start of a new week is looking little better as the sell-off in global risk assets continues today.

“This is new territory,” Sam Stovall, chief investment strategist at CFRA Research, told Reuters. “The market is currently in a crisis of confidence.”

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crisis indeed. That sentiment was reflected in a new poll by personal finance website Finder, which found 24 percent of Canadians don’t trust the stock market and plan to make money this year. Put in numbers, that’s 7.5 million Canadians ready to cut their losses.

“Based on our data, we see that 1 in 4 Canadians are trying to minimize their market losses by withdrawing in 2022. This could become a really big problem,” Romana King, senior finance editor at Finder, said in the release.

Almost half of the respondents, 41 percent, are sticking with the market and plan to buy and hold for the long term. But 74 percent aren’t confident they’ll make a profit on their investments this year.

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Confidence in stocks varies by region, according to the survey, with Ontario residents being the least confident and British Columbia residents the most. One in three BC investors are fairly or very confident of meeting or exceeding its returns in 2022, the highest in Canada. Alberta investors are the most likely to stay on course, with 49 percent adopting a buy-and-hold or long-term strategy, although 45 percent are uncertain about the market.

Pessimism is far from just a Canadian phenomenon. According to strategists at BofA Global Research, investor sentiment is “undoubtedly” the worst since the global financial crisis, with the bull and bear indicator returning to its maximum bearish levels.

“3rd Great Bond Bear market so far a doozy”, with the highest losses on government bonds since 1920, wrote the strategists led by Michael Hartnett in their weekly note The Flow Show.

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Cash inflows reached $30.3 billion for the week ended September 21, while equities saw outflows of $7.8 billion. Bonds lost $6.9 billion and gold lost $400 million.

And according to analysts, we haven’t seen the bottoms yet.

“Inflation/rate/recession shocks are not over yet, plus bond crashes in recent weeks means credit spreads are up, stocks aren’t down yet,” Hartnett’s team wrote.

Goldman Sachs last week cut its year-end target for the S&P 500 by 700 points to 3,600, and Bank of America is suggesting it could be even lower.

“Nibble at 3,600 SPX, bite at 3,300, swallow at 3,000,” Hartnett’s team wrote.

Now there’s a reason for investors to jump into the market.

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HISTORICAL STORM Waves roll near a damaged home built near shore as Hurricane Fiona passes the Atlantic settlement of Port aux Basques, Newfoundland and Labrador. The historic storm swept across eastern Canada, forcing evacuations, uprooting trees and power lines, and reducing many homes to “just rubble,” reports Reuters. The full extent of the destruction will only become known in the coming days and weeks. But with gusts of up to 170 km/h blowing away homes, bridges and roads, Fiona was a reminder of the damage caused by other storms, including Hurricane Dorian in 2019, which cost an estimated $105 million in insurance would have . Prime Minister Justin Trudeau said Canadian forces are being deployed to help with the cleanup effort. Read the heartbreaking story on location on the battered Newfoundland coast. Photo courtesy of Wreckhouse Press via Reuters

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Friday’s retail sales suggest Bank of Canada rate hikes are starting to bite something other than the housing market.

Sales fell more than expected in July, and while lower gasoline prices were one reason, the drop was widespread, CIBC economist Karyne Charbonneau said, noting that the only sectors where sales rose were sporting goods and miscellaneous Shops (including pet shops and cannabis were shops).

The August flash estimate calls for a rise, but it’s mild at 0.4%.

Charbonneau says this sign of weakness in retail sales, which have remained resilient, finally provides evidence that the impact of higher interest rates is wearing off.

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“This is the kind of data that the Bank of Canada will be looking for as it enters what is essentially the final phase of its growth cycle,” Charbonneau wrote. “We continue to expect another 50 basis point hike in October before further signs of a slowing economy allow the bank to pause its rate hikes.”

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In times of high inflation, having money is even more important to balancing our budgets. But it’s not only a good idea that we learn how to manage our money better, it’s just as important to teach our children. Sandra Fry, writing for the Financial Post, has some tips on how parents can teach their children good money management. The first: start the process as soon as your kids start asking you to buy them things. Get all the tips here

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Today’s post has been written by Pamela Heaven (@pamheaven), with additional coverage from The Canadian Press, Thomson Reuters and Bloomberg.

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