The COVID-19 world-wide outbreak has led to a strong instability in the stock market. Some $12 TRILLION has navigated away from the equities markets over the last few weeks amid fears that the virus pandemic will weaken the economy.
The underlying economic conditions remain solid in the US with low unemployment, strong jobs activity, and up until just recently, excellent consumer demand.
It is important to remember that the money that exited the US equities market did NOT go away entirely. Investors simply sold off shares of stock and exchanged it for cash. The first week of the sell-off exchanged about $6.5 trillion in market value for probably around $5.5 trillion in cash. As the stock prices tumbled some of that market value is gone but I would estimate that 80% of it was exchanged for cash value. Full disclosure, I am guessing on the cash percentage based on the current value of the market versus the value before the sell off, could be higher or lower depending on exactly how many shares were exchanged before prices fell.
That cash has to go somewhere. Cash investments in the last decade have not paid well at all. So those panicked investors have to park the cash somewhere they feel comfortable. Mortgages and bonds are the typical landing spot for cashed out equities in an uncertain market. Strangely, much of this cash did NOT end up in those traditional spots. Even gold went soft. So where is all that money?
Some of it went to cover margin calls for investors that borrow against stock portfolio value. But some of it is quite possibly in private equity. That suggests money is available to borrow for big projects like what we have on the Waterfront here in Vancouver. Now could be an excellent time to tap that cash. Developers like Gramor, Summit, Cascadia, Hurley, and Killian Pacific may have an opportunity to get some of these proposed projects funded. I’d love to see Killian Pacific do something with the vacant Library Square. The Carr Cadillac dealer left near 20 years ago and that spot remains unused. Perhaps Summit can pull the trigger on Timberhouse for Block 3.
This week we had a few new listings for urban condos and a few that went pending or closed. It was a neutral week. Jackson Square properties got the tower crane up and operating for the Block 20 project, “The Columbia.” Things continue to move along nicely.