It is extremely challenging to write financial posts on COVID-19 as the situation is fluid. Whatever the challenge in writing, it is far more difficult for Canadians and small businesses who are adapting to changes on the fly.
The programs Canadians intend to rely upon are upgraded and changed daily by governments, who themselves need to adapt to constantly changing economic conditions. This has caused significant confusion among Canadians about the qualifying conditions and application process for these programs.
For small businesses who are facing gut-wrenching decisions on staffing, the lack of clarity has been a significant issue, as they are not sure whether to lay off staff or to hold on and hope for financial assistance.
Government Program Updates
As I write this post, the original Emergency Care Benefit (ECB) and Emergency Support Benefit (ESB) programs have been replaced by a single more generous program known as the Canada Emergency Response Benefit (CERB).
On wage subsidies, the original 10% Employer Wage Subsidy Program (EWSP) has been maintained, but a sister program called the Canada Emergency Wage Subsidy (CEWS) was announced that introduces a 75% wage subsidy. These two programs will co-exist. It is hoped the CEWS has been upgraded to a level that will allow small businesses to keep their employees on payroll, rather than laying them off, and be incentive enough to rehire employees previously let go.
See this detailed article to understand the CEWS and how it works with the EWSP.
Here is an update as of April 8th for the changes to the CEWS.
There have been multiple filing and payment extensions for tax returns, from personal tax, to corporate tax to HST returns.
This document is an excellent summary of all the new deadlines and extensions.
If I had to suggest one thing you should do, it would be to watch this webcast by BDO - Part 2: Cash Flow Strategies and Government Incentives in the time of COVID-19. It is an oral breakdown of all these programs with questions. Register then watch
here.
There are two other important programs, the Canada Emergency Response Benefit I noted earlier (This program will provide $2,000 a month for up to four months for workers who lose their income as a result of the COVID-19 pandemic) and the Canada Emergency Business Account (loans of up to $40,000). Please check back during the week as I hope to have links or further details added in the next few days.
The pace of change is so quick that some parts of this post may be overtaken by current events by the time you read it. To stay updated,
I recommend this hub of COVID-19 coverage created and updated regularly by BDO.
Why emotions are a poor guide to investing
The roller coaster ride the stock market has taken us on has been far less exhilarating than the roller coaster at your favourite theme park. As of April 3rd, the Dow is down 26% for the year and the TSX is down almost 24%. However, on March 23rd, those numbers were down around 35% and 34% respectively.
This ride really tests our risk tolerance -
see the discussion in this blog post under equity exposure - and makes many of us emotional wrecks.
I have always been interested in the emotional side of investing and this topic came up during a conference call I was part of, put on by Tacita Capital, one of the investment managers on the BDO Wealth Advisory platform. The call’s main theme was COVID-19 and the state of the market, but one slide featuring a graphic by Russell Investments really caught my attention.
The graphic’s purpose was to point out how our emotions are a poor guide to investing, which I think most of us agree is a very true statement.
We start out with optimism, and the curve starts to move upwards as we get excited and moves higher as we are thrilled. We then hit a point of euphoria, which Tacita noted is the point of maximum risk. It is also the point where many people plow more money into the market assuming the good times will continue forever.
The curve then turns downward to anxiety, keeps moving downward to fear and from fear to panic, which I would suggest many of us reached on March 23 or earlier (based on what many friends, acquaintances and clients have told me). Unfortunately, the graphic reflects one more step on the downward slope, that being despondency.
The good news is despondency is also the point of maximum financial opportunity (assuming you have cash resources available). From there we thankfully start back up the curve, from hope to relief to optimism.
Every investor is sitting at their own individual stage. Whatever your investing mood and whatever your portfolio’s performance, I keep telling everyone - including myself - that the stage of hope will arrive. Here’s hoping that it arrives sooner rather than later for all of us.
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The last couple months have been very distressing from a medical and self-isolation perspective. They have also been difficult from a financial and business perspective. I was recently thinking about whether we could learn any financial and business lessons from this time. I came up with six lessons, which The Globe and Mail published on Thursday. I would like to thank Roma Luciw of the Globe for her editing skills.
