If there was a playbook to guide us through these historic events, my role would be significantly diminished as would the need for any advice or perspective. Instead, we’re drafting our own new script, using the economic and health data that is available both globally and here at home, as well as the full complement of resources of RBC. The purpose of these notes is to keep you informed, and to clearly communicate how we’re advising our clients and building a strategy to get us through the current environment.

Coronavirus

At a high level, progress continues to be made in the fight against COVID-19, particularly in the developed world. The number of new case counts in Canada, the United States and across much of Europe continues to trend lower. Troublesome provinces such as Ontario and Quebec are finally showing signs that the social distances and mitigation strategies are proving effective. There are hot spots that continue to be areas of great concern, both geographically and in specific locations such as long-term care facilities, and more needs to be done to manage case counts and mortality rates among these most vulnerable populations.

The situation in the emerging world is also concerning. While the virus’ onset in countries such as Russia, Brazil, India and South Africa was after the initial cases report here, it has taken longer for testing to be implemented and control measures to be enforced so infection rates are currently rising rapidly. This trend may get worse before stabilizing and showing signs of improvement.

Recent news relating to anti-viral treatment and vaccination development is encouraging. Gilead’s remdesivir has been made available for those hospitalized with severe symptoms of COVID-19 after encouraging, and expedited, clinical trials for the drug. And this week marks the start of clinical trials for four separate vaccine candidates developed by Pfizer and German-based BioNTech. It is expected the enrollment in these trials will increase over the coming weeks so long as the data remains positive.

Economies Reopening

The process of getting an economy back up and running after an abrupt, forced shut-down is essentially experimental. There is some precedence in countries such as China, Singapore and Taiwan, but the dynamics and drivers of their economies are not identical to ours in North America. As parts of the United States begin to return to normal activity levels, they will serve as models for other areas of the country and for Canada.

Our Prime Minister and the premiers have released a list of common principles in each region of Canada for restarting the economy, including among other things: stability in the number of hospitalizations and new cases, sufficient capacity to test, trace and isolate infected persons, workplace protocols including protective equipment, and coordination of non-essential travel. There is an acknowledgement that each region faces unique circumstances and is likely to need different actions at different times.

Regardless of the approach or the timing, this process will be done gradually and in phases with careful examination of progress to ensure we don’t experience a resurgence of infections.

Playbook Update

The month of March was one of the worst on record for global markets and was followed by one of the best on record in April. We noted early on that March’s declines were the result of a forced economic shutdown, and not a result of typical factors that cause recessions. The economy was contracting because people weren’t allowed to spend, not because they couldn’t afford to spend.

We also suggested at the time that markets are typically forward-looking. The declines in March were reflective of poor economic and corporate data that was to be reported in late April and May regarding results from the later part of Q1 and for Q2. Markets would eventually begin to focus on a recovery of this data and focus on fundamentals for the second half of 2020 and into 2021. The gains made in April were more dramatic than expected, yet welcome given the drawdowns through March.

The forward-looking function of markets is important to keep in mind. A company’s valuation and its stock price is a direct reflection of the amount a company is expected to earn for shareholders not just this year but for the foreseeable future. By looking beyond the current environment, the market can now reflect a company’s earning potential beyond this pandemic and can refocus on the prospects for profits earned next year, and the year after, and so on. It is those successful and resilient businesses that we want to find and own today.

We did take advantage of the opportunity the market presented to ensure the companies we own are well positioned, and have done some trading to add to current positions and/or turnover other positions to upgrade the quality of accounts. As well, we have participated in calls and video meetings with all of our fund managers to ensure we understand how they have repositioned the portfolios they manage for us, and ensure they are sticking to the mandates and objectives we have selected them for.

I don’t expect the path forward to be easy. There are likely to be several bumps in the road to a full economic recovery as uncertainty and risks of additional outbreaks will remain higher than normal. Our strategy will continue to be focused on actively managing client portfolios and sticking with our investment process. As we’re able to meet with clients, it will give us the opportunity to review financial plans with updates to timelines, goals and objectives, and investment results, as well as to follow up on estate planning initiatives that may take on new priorities for some.

Take care of yourselves and each other, and together we will get through this time. Feel free to contact me with any questions or concerns. Stay safe.