Are we seeing a repeat of the 2008 recession with the deep and peak valley the TSX is going through at present? On Thursday, February 27, 2020, Canada’s main stock market stopped trading due to a technical issue. The early close happened during a tumultuous week of trading.
The TSX closed at the week at 16,263.10 or a decline of 1,580.4 points (-9.72%) from the previous Friday closing. You can’t help but recall how the TSX performed in 2008.
Worst record
The percentage drop during the week in focus was mild in comparison to the forgettable worst days of the TSX some 12 years ago. It is on record that 2008 was one of the index’s worst years. The TSX lost 35% of its value, or an absolute amount of $70 billion.
Similarly, there were five worst days recorded during the year. The average percentage drop was 8.58%. Before the recession started, the problem seemed isolated. The TSX ended summer on a high note, oil prices soared, and Lehman Brothers in the U.S. folded.
Parallels
Suddenly, the problem spread and affected all of the key sectors. The consumer staples sector got it too, but its 12% drop in 2008 was the lightest. The stocks in the sector demonstrated their defensive qualities.
Somehow, you can see similarities between the events in 2008 and 2020. For one, the TSX posted its worst week since 2008. The novel coronavirus outbreak is causing the upheaval in global stock markets and disrupting supply chains worldwide.
If companies with no direct connection to the virus report business reversals, it could trigger a global recession. Let’s hope that doesn’t happen.
A strong buy opportunity
I don’t know if it’s fair to assume that e-commerce will flourish in the wake of the coronavirus outbreak. The prevailing crisis might force a significant number of consumers to limit movement and stay at home.
If that is the case, Shopify (TSX: SHOP)(NYSE:SHOP) becomes an ideal investment option. The cloud-based multi-channel commerce platform for small and medium-sized businesses was not spared from the recent market sell-off. From $718.66 nearly two weeks ago, the price fell by 11.88% to $633.29.
Should investors thank the coronavirus outbreak for opening a buying opportunity in the fast-growing business of Shopify? In 2019, revenue grew by 47% year on year. Notably, the base of monthly recurring revenue grew by 32%.
With merchants flocking to sign up, subscription solutions climbed 37% year on year. Merchant solutions recorded a blockbuster 53% growth.
The number of transactions on-site is exponentially growing, and the over one million merchants are satisfied with the software-as-a-service (SaaS) platform of Shopify.
Erratic environment
It’s hard to tell when the vaccine for the coronavirus will be available. Meanwhile, the death toll is rising, and more countries are reporting cases of infection. The result is mayhem in global markets, including the TSX.
Many investors are in panic mode, while the savvy ones are looking for openings to scoop up good, high-octane companies like Shopify.
Today might be the only time you can buy the top TSX tech stock at a discount. When the situation stabilizes, the price might be prohibitive again.
