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Topic: Spike in savings -> investments

Covid has driven down expenses for average Canadians - therefore their percentage of savings compared to their net income has skyrocketed from around 3.5% to 15+%.  I guess its all that vacation money they're saving.

https://www.bcrea.bc.ca/wp-content/uploads/mrf-2.jpg
Reference:
https://www.bcrea.bc.ca/economics/mortg … -forecast/



And what is everyone doing with all that extra savings?

https://image.cnbcfm.com/api/v1/image/106865966-1617967532026-20210409_inflows_stocks_5_months_12_years.png?v=1617967552&w=740&h=300
Reference:
https://www.cnbc.com/2021/04/09/investo … bined.html


The big question is, will this create a new breed of long term investors?  Or will they just pull that vacation money right back out once lockdowns are over? (and thus driving a market crash - or at least a long term sideways trend?)

Liked by: aactive

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Re: Spike in savings -> investments

I agree. I think it is a combination of a lot of things. Our daughter in Hamilton was telling me, that as a result of working at home instead of 45 minutes each way daily commute to work, had reduced her gas usage by 100's of dollars a month, her insurance was reduced, clothes expenses, dining out and entertainment expenses are way down. She has paid off her credit cards and added to her savings. I think the situation is shared by millions of Canadians.

Candy is childhood, the best and bright moments you wish could have lasted forever. - Dylan Lauren

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Re: Spike in savings -> investments

The increase in real estate costs and job losses will nullify these gains.
Small business (the cornerstone of our economy) has taken the brunt of the impact with the covid shutdowns. The trickle down effect of this will be felt for years to come.

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Re: Spike in savings -> investments

While I do agree that _certain_ small businesses have been hit hard, I feel like other small businesses have made out like bandits too, while others are basically unaffected.  Businesses have used Covid as a reason/excuse to raise prices, cut employees (obviously the worst ones first), trim the fat, focus their efforts, etc...

One of my hobbies is that I'm a volunteer firefighter - a way to get out from behind the desk and meet other people, not to mention that I'm a bit of an adrenaline junkie.  There about 30 other members, and its an eclectic bunch of people, everyone from doctors, nurses, paramedics, engineers, business managers, mechanics, plumbers, carpenters, electricians, truck drivers, retirees, etc.  Not a one is hurting from this.  People are investing that extra cash into their homes, their hobbies, new vehicles, recreational equipment & activities, new businesses, as well as the markets.

Locally, they are hiring like crazy - they cannot find enough workers, I'm seeing signs up, and hearing about businesses hiring dozens of people.

Yes, if you're buying real estate right now, I think that will eat up those savings.  Hopefully they'll be able to afford those mortgage payments when rates go up.

And the numbers clearly show the average Canadian isn't hurting because they're banking 5x more money than usual, and that is fueling investments.

That second chart above is absolutely astounding.  Inflows to stocks in the past 5 months exceed the past 12 years.   Seriously, that is absolutely nuts.

What will be interesting to see is if the past year's injection into the markets will be withdrawn just as quickly and will lead to a protracted bear market.  Just don't be the last one to pull out your Covid savings!

Liked by: FM