TSX Composite Index Dips Almost 5%: Is Stock Market Crash At 2.0 Here?

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Billionaire investors like George Soros and Warren Buffett have long claimed that a second stock market crash is happening. the TSX Composite Index jumped 30% between April 1 and September 1 after falling 34% in March. The market collapsed when the COVID-19 pandemic hit and the market recovered thanks to the government’s stimulus package.There were fears that the second wave of the pandemic after the economy reopened would repeat the March sell-off. These fears materialize. Growing cases of COVID-19 in the United States, Canada and Europe are recreating the conditions for a lockdown. But this time around, there won’t be a full national lockdown but tighter travel restrictions. Governments are better prepared to deal with a coronavirus outbreak than they were in March.

Is the stock market crash 2.0 here?

George Soros said the free money from the fiscal stimulus package created a liquidity bubble, which took stock valuations to new highs. When valuations are high, there is more to the downside than to the upside.

The stock market was already bearish when the Canada Revenue Agency (CRA) delayed Canada Recovery Benefit (CRB) payments due to a technical glitch. The liquidity from the stimulus package was drying up. The resurgence of COVID-19 has accelerated the bearish tone. the The TSX Composite Index has fallen 4.7% in the last three trading days and down 6.2% over 13 trading days. In the March liquidation, the index fell 11.8% in three trading days and 18.7% over 13 trading days.

The potential of a new wave of injured pandemic Air Canada (TSX: A) and Suncor Energy (TSX: SU) (NYSE: SU) most. Their stock prices fell 11.6% and 10.2%, respectively, to their March lows. Even stocks of viruses like Shopify, Lightspeed POS, and Kinaxis dipped to single digits this week.

Companies release their third quarter results. The decline in the TSX Composite Index was partially offset by earnings surprises. For example, better than expected third quarter results have been sent FPI RioCan stock up 2.46%.

Stocks in the red

AC and Suncor are already struggling with weak demand for air transportation and oil. Another wave of tighter restrictions has dampened any hope of a recovery this year. AC and Suncor’s stock price momentum has been limited since the pandemic. The recent drop has pushed their stock prices to the lower end of their price range. AC stock found support at $ 15. But Suncor’s stock lost support and fell below $ 15. Warren Buffett left airline stocks but retained his investment in Suncor in April.

Prolonged weakness in the sector leads to consolidation. The oil and gas industry has been in crisis for six years and the pandemic has made matters worse. In addition, the interest rates are close to zero, which creates an opportunity to acquire companies with strong assets at an attractive price.

The Canadian oil and gas industry experienced its first mega-merger; Cenovus Energy agreed to acquire Husky Energy for $ 3.8 billion. Analysts believe this could be the start of a M&A supercycle. Suncor is in a much better position than most oil and gas companies because of its integrated business model. Its third quarter results have provided insight into its liquidity, which will help it weather the crisis and operational efficiency that will help it return to profit when the price of oil returns to US $ 45 / barrel.

The airline industry is already consolidated. It could be the subject of further consolidation or some airlines could declare bankruptcy. For example, AC reduced the Transat AT bid price of more than 70% to $ 190 million. But that deal could be jeopardized if AC faces the risk of bankruptcy.

What should you do in this market downturn?

The recent decline in the stock market has created an opportunity to buy post-pandemic stocks at a discount. Suncor has growth potential, but there are risks to growing. There are better stocks like Enbridge and RioCan, which have dividend yields of over 8.86% and 9.97%, respectively. These stocks are also reporting positive earnings and cash flow. The decline in the stock market has created an opportunity to lock in those high dividend yields for a lifetime.

Here are some other quality stocks to buy during the recent stock market pullback.

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Fool contributor Puja Tayal has no position in any of the stocks mentioned. Tom Gardner owns shares of Shopify. The Motley Fool owns shares and recommends Enbridge, Shopify, and Shopify. Motley Fool owns shares of Lightspeed POS Inc. Motley Fool recommends KINAXIS INC.

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