"You never want a serious crisis to go to waste," said U.S. President Barack Obama’s former chief-of-staff Rahm Emanuel during the darkest days of the 2008 recession, the fiscal collapse that ushered in a global recession, cratered the stock market and all but wiped out three of the world’s top investment banks in the process.
As we know though, investors are a resilient bunch, particularly the wealthiest ones. We were reminded again of that with the just-released survey by BMO Harris Bank, which polled high-net worth individuals in Canada and the U.S., the majority of whom are richer today than they were five years ago when the North American economy tanked, and nearly took down the global banking system in the process.
For BMO's purposes, high-net worth is defined as Canadians with more than $1 million to play with in the market. Of those interviewed, only 11 per cent say they were worse off today than in 2008.
“High-net-worth Canadians clearly feel they have bounced back well from the 2008 downturn and are fairly upbeat about what the future has in store for Canada’s economy,” Alex Dousmanis-Curtis, senior vice-president and head of BMO Private Banking, said on Thursday in a release.
That kind of optimism among the affluent is fairly astounding if you think back to the fall of 2008, or to some of the books, articles and movies that came out almost immediately afterward.
The sense of doom was palatable. Retirement savings were wiped out. Snow-bird investors watched as properties in Florida and Arizona carried mortgages so deeply underwater that walking away seemed the only sensible move. Private schools across Toronto were forced to turn their worries and fears into open houses and aggressive marketing campaigns, the better to staunch the risk of withdrawals.
And yet as Emanuel advised, when much seemed lost, savvy investors with a little depth still in their pockets saw this as a great time to begin buying again, snapping up stocks, bonds and properties that were hastily dumped in the great swing downward. And while everything that falls does not someday go up, experienced hands know all too well that markets are cyclical, and that eventually the tide will come back in.
To no surprise, it has roared back a bit more forcefully in the U.S., where the BMO Harris poll shows that 61 per cent of Americans feel better off today than before the recession, compared to only 54 per cent in Canada. They’re a more bullish lot down there, and while it’s that confidence that can lead to disastrous housing bubbles, it also provides the fuel for soaring stock prices.
True to form, 47 per cent of Canadians believe Canada’s economy will brighten this year, while significantly more, 61 per cent, believe the U.S.’s outlook will improve. Ask for specifics, 76 per cent are placing their bets on the energy sector providing the strongest returns, with only 30 per cent believing the same for manufacturing.
- Rahm Emanuel
- President Barack Obama