I have noticed that the warmer weather has brought better spirits to our family. We are still not leaving our home much, with the exception of Kieron, who has managed to play a few rounds of socially distanced golf. The time we do get to spend outdoors has made us feel less restricted. We are also driving more for a change of scenery. I spend my time in the car noticing what businesses have been able to open; ones that are adapting to operate in this environment and others that remain shuttered. There is considerable innovation and creativity in some businesses allowing them to actually flourish. Last week we took a drive to a Burlington children's organic clothing company that has transitioned their business to make masks. They have a drive-through window, allowing you to stay in your car, while the sales person helps you pick out the colours of your new mask. When we went in the middle of the day on a Wednesday there was a line of cars and their business looked to be flourishing. It is a testament to our ability to adapt in both our personal lives and businesses despite a challenging environment. RBC has shared some stories of businesses adapting:  A dog walker and a chef have been able to create business opportunities while serving the needs of their communities.

 

Economic and Market Update

Summer is upon us and normally many of us would be busy planning vacations. This year though, we are struggling with how to take our vacation. With borders closed and flying or staying in a hotel not feeling safe one would expect this to be negative for the tourism sector. Globally many areas will suffer but Economist Nathan Janzen wonders if this could actually be a boon to Canada’s tourism sector. To recover, Canadian tourism needs more Canadians. (10 minutes)

 

It was an eventful week with many of us focused on the social unrest that is occurring across the United States. The mass protests have sparked a concern over a second wave of COVID 19 cases as the size of the gatherings have made it difficult to socially distance. In Canada the two most problematic provinces, Ontario and Quebec appear to remain on an improving trajectory relating to new virus cases. However, outside of North America new outbreaks and some evidence of second waves are occurring in Latin America, Brazil, Middle East and Asia. Despite pandemic related concerns and the state of unemployment we continue to see strong equity markets. The S&P 500 is up almost 40% from its March 23 low. This robust recovery in markets can seem at odds with what we are seeing in our communities: unemployment, limited store opening, many businesses running nowhere near full capacity and a pandemic restricted economy. This week's Global Insight discusses what happens When Wall Street bypasses Main Street.

 

Tom Porcelli, a Managing Director and Chief U.S. Economist at RBC Capital Markets, joins Janet Engels, Head of the Portfolio Advisory Group – U.S., to discuss the post-COVID-19 U.S. economic recovery. Their conversation examines the key economic data, the outlook for employment and consumption, and the effect of stimulus measures. They also explore whether negative interest rates are a possibility in the U.S. Click here to listen to The road to recovery for the U.S. economy (26 minutes). This morning we saw a significant and welcome upside surprise in payroll employment in the US - an increase of 2.5 million and US unemployment fell to 13.3% from 14.4% in April. Canada also saw employment up 290,000 in May but our unemployment rate increased to 13.7%, with some earlier job losses officially counted in this month. These numbers are definitely a clear step in the right direction but there is still a long way to go. Overall, we are encouraged by the broadening rally across equities, which suggests growing confidence in the economic recovery. Its path and sustainability longer-term remain questions in our minds. A new near-term risk has presented itself in the form of the abandonment of social distancing across the United States. We will be watching closely to see if it results in a re-escalation of the health crisis. We continue to remain defensive in our discretionary equity portfolios until we have confidence in a recovery.

 

This pandemic started with many people stock piling toilet paper, and I am still finding it difficult to get Lysol wipes or hand sanitizer. As we move beyond the crisis fueled buying we may continue to spend differently. We need to monitor consumer trends and understand how retailers are going to adapt. A few large retailers have applied for bankruptcy protection on both sides of the border. In Canada outdoor retailer Sail and Reitmans have seeked protection, while the US saw large stores J.C. Penny and Neiman Marcus enter bankruptcy protection. These businesses had been showing signs of struggle prior to the pandemic, but the longer the restrictions continue to curb or change our spending the more of these types of protection actions we can expect to see. RBC Capital Market's Consumer Discretionary & Staples Analyst, Irene Nattal discusses How Maslow's Hierarchy can explain pandemic spending. Irene does a good job explaining why I have started baking and how businesses need to be aware of shifts in consumer demand. As we discussed in our last blog, monitoring spending and the ability of businesses to innovate in this environment will continue to guide our investments.

 

Financial Health

With more than 7 million students displaced from Canadian classrooms, we all know young people that are experiencing a dramatic change in their education. Canadian institutions have historically lacked the resources for robust online learning, with some educators resisting this change citing a concern over lack of personalization leading to student disengagement. For our family it has been amazing to watch how quickly our children's schools were able to transition to a digital education. However, our experience does not appear to be the norm. Even within our own office each family is having a very different experience with children's education delivery. Many post-secondary institutions are moving to an online delivery for the 2020/2021 school year due to the pandemic, changing the whole first year of university/college experience for new students. The Future of Post-Secondary Education: On Campus, Online and On Demand considers the impact of these changes. To those that would prefer to listen to a podcast there is one available at the bottom of the article.

 

In my daily walks I am noticing that a few homes have recently sold, after sitting on the market for the duration of the pandemic. Economist Robert Hogue reviews how Home Buyers and Sellers Returned to the Market in May. Despite an increase in activity he still expects a softening of price support.

 

RBC Wealth Management Canada is pleased to offer a national virtual client event: Facing Canada’s “uncomfortable truth”: The future of long-term care in Canada. John Stackhouse will be joined by Dr. Samir Sinha, Director of Geriatrics at Toronto’s Sinai Health System and University Health Network and Leanne Kaufman, President and CEO, RBC Royal Trust who will discuss:

• The status and future of long-term care in Canada

• How older Canadians can achieve and sustain the retirement lifestyle they want

• Helping older Canadians protect themselves from scams, frauds and cyber attacks.

This event will be taking place on Monday, June 15, 2020 at 12:00 ET. If you are interested in joining us in this virtual event please email Sarah and she will forward you an invitation allowing you to register for the event.

 

We are pleased that the new RBC Wealth Management Online website is launching this weekend. This completely new  website will be replacing our current website DS Online. The new site is both tablet and mobile friendly, easier to use and offers major upgrades while allowing you to access the information you need. If you are already a user of DS Online, no action is required on your part. Simply log in with your existing password.

We are trying our best in our office to reduce our paper usage.  At WM Online you can receive all your key documents to reduce your paperwork and help the environment.  Plus, right now, when you switch to paperless "eDocuments" we will plant a tree in your honour through our partnership with Tree Canada.

 

 

 

Our team continues to work from home, except for Karen who is holding down the fort in our office. We miss seeing all of you in person and we miss being together in person as a team. The last few Fridays we have been enjoying a digital lunch together. Have a great weekend.