Chart of the Week (COW)

This week’s chart of the week (now officially called COW) is going to double as our COVID-19 update. Our COW is actually a combination of two charts. The first chart looks at the U.K. and its second wave of COVID-19, which occurred during the summer of 2020:

As you can see, as caseloads rose, fatalities rose as well and at 50-days from the start of the second wave, the U.K. was at a fatality rate of ~1% of COVID cases. Now, it is important to note that during the second wave, there were no vaccines, while most treatments for COVID were still in their experimental phase. Now, let’s pivot to the third wave, which began in late May of 2021:

Let’s start with the right side of the chart, which looks very similar to the right side during the second wave of COVID. The highly infectious delta variant is running amok in the U.K. and despite a vaccination rate of ~60%, delta has still been able to drive the infection rate to close to the levels the U.K. saw last summer. However, because such a high percentage of the population is now vaccinated (especially the most vulnerable populations) and because the vaccines are highly effective in preventing severe cases of COVID, the fatality rate is now ~0.1% or 90% lower than it was during wave 2.

Market Update

A very similar pattern to what we have seen over the past couple of months – a lot of choppiness, but an overall positive tone. Monday saw one of the worst days for the market since last October (pre-vaccine) primarily on concerns about the spreading of the delta variant. However, as has been the case for much of the past year, the stock market shrugged off the news and made back most of its Monday losses through the remainder of the week. For its part, the TSX looks to close the week slightly above 20k – over the past 10-weeks, the TSX has closed the week over 20k 7 times and under 20k 3x.

We are in the midst of third quarter reporting season and thus far the results have been very strong. Of the 191 S&P 500 companies that have reported, 83% have reported better than expected earnings results and 81% have beaten revenue estimates. Further, guidance for future quarters has also been good with 17% guiding higher and only 3% guiding lower.

Economic Update

Not much to report. However, we would note that RBC Economics has made the call that it believes that the Canadian dollar, which hit $0.83 (a 6-year high) a couple of months ago and now sits at ~$0.79, has hit its higher water mark for the year. RBC Economics believes that a combination of two things will keep a lid on the dollar: 1) commodity prices have likely peaked; 2) the Bank of Canada, which stood out a bit early in the year in terms of its pivot toward a more neutral stance on interest rates, now looks similar to other central banks, which have also begun to signal that rate hikes, while not imminent, are something worth discussing.