There has never been a more savage economic shock than the COVID-19 crisis. In Canada, financial managers expect gross domestic product to fall by 12% this year, four times the steepest drop on record. Meanwhile, two in every three Canadians are facing financial ruin.
As early as mid-March, Angus Reid Institute surveyed Canadians to know their worries regarding the impact of COVID-19 on personal finances. Nearly two-thirds of the respondents believe it will hurt personal bottom lines. Rising credit card debts, job loss, and reduced income will plunge them into severe financial crisis.
The COVID-19 pandemic is a total surprise. Canada is spending billions of dollars in stimulus packages, but it’s driving the country’s deficit beyond the size of the economy itself. Similarly, Canadians are piling up credit card debts due to financial hardship. After the pandemic, you’ll have accumulated bills to pay.
A recent survey by Leger and the Association for Canadian Studies reveals that 41% of Canadians feel the government needs to scale back spending on pandemic support programs to individuals and businesses. The latest projected government deficit stands at a staggering $343 billion.
For individuals, carrying more debt balances is dangerous. It’s different if you’re a home buyer borrowing to take advantage of low-interest rates. Your credit card is not a piggy bank you can raid. Otherwise, debt will overwhelm you, especially if you’re spending more than your cash inflows.
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Trust in government and media institutions
The Angus Reid Institute poll results also show that 76% of Canadians are anxious about a loved one contracting the virus. However, the survey also reveals that people place more trust in government and media institutions than ever before.
Thomson Reuters (TSX:TRI)(NSYE:TRI) is gaining investor attention lately. The shares of this $46.84 billion provider of news and business information services have risen by 26.4% since dropping to $76.46 on March 23, 2020. As of this writing, the stock is trading at $94.36, while the year-to-date gain is 2.7%.
Reuters News commands a strong following. This segment provides business, financial, national, and international news to professionals, media organizations, and hold industry events. According to Thomson Reuters’ CEO Steve Hasker, business is historically resilient, but not immune to the recent downturn.
This Canadian multinational media conglomerate generates most of its revenues from selling information and software solutions electronically and on a subscription basis. In Q1 2020, there was 2% organic revenue growth due to the 4% growth in recurring revenues. Adjusted EBITDA grew by 20.9% (from $397 to $480 million) versus Q1 2019.
Thomson Reuters is a Dividend Aristocrat given its dividend growth streak of 26 years. If you want to take a position today, the dividend yield is a modest 2.24%. Management expects total revenue growth in 2020 to be 3% to 4%.
Hold on tight
The economy will recover eventually, but it will take time. To avoid financial strain, avail of government emergency programs where you’re eligible. Consolidate your debts in one account that offers a much lower interest rate. If you have reliable stock investments, stick to your long-term financial goals.
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Fool contributor Christopher Liew has no position in any of the stocks mentioned.