We know many of you have been enjoying golf now that the courses are open. The weather has been great and golf has been a good activity to participate in that allows for social distancing. This time last year the RBC Canadian Open was in our backyard. It was an exciting event and sadly this year's Canadian Open was one of the tournaments that was canceled due to COVID-19. Listen to Team RBC Ambassadors talk about how they are looking forward to participating in next year's RBC Canadian Open. In our house we are excited to see a return to sports on TV with the RBC Heritage happening this weekend just in time for Father's Day! It will be interesting to see how pro sports can return and will it be the same without fans. Our family is definitely missing sports of all kinds, both participating in and watching. In this 10-minute take; Mary DePaoli, RBC EVP and Chief Marketing Officer, discusses Can pro sports stage an epic comeback?
In the News
We are seeing positive COVID-19 trends in Canada and Western European countries which are experiencing fewer new infections. However, Central and South America are still a concern with Brazil reporting new daily cases exceeding 30,000. On the other side of the world, India, Pakistan and Indonesia are struggling to contain their outbreaks, while Beijing experienced a new outbreak. Investors this week were focused on the U.S., where several states are seeing rising new daily cases. Some of these states are indicating that the average age of the newly infected appears to be meaningfully younger. It is hard to pin point why we are seeing new cases rise in some areas but they are likely linked to economic reopening, mass gatherings, and a lack of mandated protective equipment. This latter point may be about to change as a number of states are considering mandating wearing masks in public. COVID-19 new cases are also increasing in younger people locally with 55% of new cases in Hamilton occurring in those under 30 in the past 10 days. Canadians seem to be increasing their mask usage and in a recent poll the majority are expecting a second wave of the pandemic. This increased mask usage is welcome news as a new study (out of McMaster University) found that the risk of transmitting the coronavirus without a mask or social distancing is 17.4% but drops to 3.1% if you wear a mask.
Some positive news emerged this week with respect to a therapeutic drug. A well-know steroid called dexamethasone, used to treat a range of conditions such as arthritis, asthma, and allergies was found to help the survival rates of some of the most critically ill virus patients.
Another topic continuing to dominate the headlines are the global protests against racism and violence towards Black communities. The conversation has extended beyond police practices and systemic racism and is focusing on what the corporate world is doing and their own records are being challenged. The podcast Corporate America's moment of truth on racism features RBC Capital Markets' Michael Carter as he shares his perspective on how companies can confront racism and what more the private sector can do.
Market and Economic Update
Last week the Fed signaled that low rates are here to stay. The Fed did not make any major policy changes but gave a better idea of the extent of support it is willing to provide in the months and years ahead. The committee indicated they expect the federal funds rate to remain at near-zero levels through to the end of 2022. They also updated their economic projections, indicating that we could see the recovery extending into 2022. While this was not a surprise to us, markets reacted negatively to the announcement last week. It served as a reminder that the path to economic recovery will be uneven, difficult to forecast and may be longer than expected. RBC Economics still sees central banks and governments around the world applying massive support and that the economic recovery will be slow and uneven. This week brought positive news to the market with US retail sales impressing in May. Retail sales were up 17.7%, more than twice the expected gain. Statistics Canada reported a similar-sized 19% increase in a preliminary estimate of May retail sales in Canada. However, US manufacturing saw a much more muted recovery following a record decline in April. We continue to expect both sectors to recover further in the coming months as regulations continue to be relaxed. Physical distancing measures will remain in place likely for the remainder of the year preventing a full recovery and we could see consumer spending held back due to elevated unemployment.
There is concern across Canada about the municipal shortfalls that cities will face. It is estimated that this shortfall could total nearly $12 billion this year alone. Cities with transit systems are suffering more from COVID-19, due to lost revenue from fares. The options to address the deficits are limited to deep spending cuts or steep property-tax increases, or both. These potential cuts and tax increases affect the economic health of our cities thus impacting the broader economy. The report Canadian City Finances Ailing from COVID-19 dives into this topic and recognizes that other levels of government will need to provide more help in support of the broader economy.
I am really enjoying the 10-Minute Take podcast series. Two topics this week peaked my interest:
Work 2.0: How tech is catalyzing the "remote first" workplace discusses how overnight the majority of office workers shifted to working from home. We have seen a shift to video conferencing and messaging apps to ensure a continuity of business. Alex Zukin, Software Equity Analyst shares how software firms are capitalizing on this opportunity.
A Path to 5G for Canadian telcos. Prior to COVID the news media was focused on the issues of building out the world's 5G network and Chinese involvement. Drew McReynolds, Telecommunications and Media Analyst reviews the importance that 5G now plays as connectivity is key to a thriving economy.
Financial Health
This pandemic is leading many Canadians to think about their own health and wealth and what will happen as we age. Many are focused on developing or revisiting their estate plans or are worried about their care as they age. In light of the recent news on the inadequate conditions in a few long-term care facilities, many of us are thinking about what resources will be available and the cost involved. This article COVID-19: How to empower older Canadians with personal and financial planning discusses the need for advanced care planning and the importance of communicating our wishes to those around us that may be part of the decision making. It also includes a link to the podcast RBC Wealth Management hosted last week Facing Canada's "uncomfortable truth"; The future of long-term care in Canada. Including your advisors in these conversations is important when building your larger financial plan. We want to focus on the kind of life you want to live and what potential care you would like before you get to that stage.
This article offers support for Talking to your parents about their estate plan. It can be a difficult conversation but it will give both you and your parents' peace of mind to know there are documents and plans in place to ensure their wishes are met.
Happy Father's Day!
Sonora Smart Dodd, one of 6 children who was raised by a widowed father, was responsible for establishing an official equivalent to Mother's day for male parents. She drummed up support with her local churches, YMCA, shop owners and government officials and was successful with the first Father's Day celebrated statewide in Washington State on June 19, 1910 but it wasn't until 1972 that Richard Nixon made it a recognized holiday. We wish all the fathers and grandfathers a very Happy Father's Day and hope that you will be surrounded (even if socially distanced) by your loved ones!