Chart of the Week (COW)

While the recovery has been uneven, we have begun to see countries exceed their pre-Covid GDP levels:

While Canada’s economy remains below its pre-Covid levels, have a read of the economics section below for RBC Economics’ view on when this may change.

COVID-19 Update

Globally cases now exceed 205 million, meaning roughly one in every 40 people has been infected with Covid (and probably much more than that as there have likely been 2-3x as many asymptomatic undiagnosed cases).

The Bad News

Delta continues to run rampant with most jurisdictions showing an upward surge in case counts. The U.S. is, perhaps, the worst of the bunch at present:

However, the good news remains that the fatality rate has continued to decline, which is indicative that while vaccinated individuals are susceptible to getting Covid, they are very unlikely to get severe or fatal cases, which has helped to push down the overall fatality rate. Meanwhile, Canada has seen its own surge, albeit at still low levels:

The Good News

We would point to a study out of the Imperial College of London, which did a random study of 100,000 people in England earlier this summer to determine how well the vaccines (primarily AZN in England) was protecting individuals from contracting Covid (almost entirely Delta). The study found that vaccinated individuals were 3x less likely to get Covid than were unvaccinated individuals, which is the first solid data point we have that the vaccines not only protect from severe cases of Covid, but also offer a strong layer of protection from even getting the virus.

Further, the study found that even those vaccinated who were infected tended to carry much lower viral loads, making them less likely to spread the Delta variant than were unvaccinated infected individuals.

If we add to this that estimates put severe cases of Covid at >99% unvaccinated, we can continue to see that despite continued risks, the vaccines are working.

Market Update

Markets continue to grind higher; although, it has been a slow and gradual process. The TSX sits within about 0.5% of an all-time high; however, at the same time, it remains within a couple of percent of where it was nearly 3-months ago. Our overall view remains upbeat, despite the Delta risks. Earnings and revenue growth remain very strong and are likely to continue to grow apace into 2022.

Economic Update

From RBC Economics: The third wave of COVID-19 related restrictions ended in June and with it the run of weak economic news. Declines in output and employment in April and May were followed by strong increases in June (GDP +0.7%, jobs +231k). Early indicators point to additional firming in July. Canada’s rapid surge to the top of the vaccination league tables sets up for the economy to weather the recent rise in Delta variant infections

much better than the previous waves of virus spread. The third wave certainly slowed the recovery with real GDP likely growing at a moderate 2.5% annual pace in the second quarter, still 1.1% below its pre-pandemic level. The economy’s momentum returned in June as more sectors reopened with the early

print on GDP showing a 0.7% gain. The pattern was echoed in the labour market with almost all of April and May’s losses recovered in June when employment jumped 231K. July’s 94K increase in employment and jump in hours worked plus stronger retail spending activity tee up for a sharp acceleration in the third quarter. If our forecast for real GDP growth to come in at an 8% annualized pace is realized, Canada’s economy will have fully recovered to pre-pandemic production levels.