Feeling Meta?

February 04, 2022 | Matt Barasch


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This week we cover topics ranging from the Meta drop, the situation in Ukraine and a Covid-19 update. 2022 continues to demonstrate that we do in fact live in interesting times.

Chart of the Week (COW)

The situation in Ukraine remains fluid. One of the biggest problems Europe faces in standing up to Russia in the face of its aggression remains Europe’s reliance on Russia for nearly half of its natural gas needs. Over the past decade, Europe has embraced greener technologies. However, at the same time, the region has largely turned against nuclear power, which some argue is the greenest of all energy sources. This has left a major gap in Europe as wind and solar are simply not able to meet Europe’s power needs (not to mention the lost nuclear production), which has made the region ever more reliant on imported natural gas. The chart below puts this into context.

COVID-19 Update

The good news is – we appear to have passed the peak of the Omicron surge on a global basis:

Now, of course, daily case counts are still averaging ~3 million/day, which is more than 3x the peaks we saw prior to Omicron, so we are far from out of the woods, but at least things appear to be moving in the right direction.

Meanwhile, Canada remains on the right path with daily case counts down by more than half from the recent peak:

Economic Update

Canada reported a 200,000 drop in employment for January and a 0.5% increase in unemployment as Omicron wreaked havoc on the economy. RBC Economics believes that this is a temporary blip in what remains a favorable employment backdrop. Hours worked fell more than 2% with more than one in ten Canadians missing some time due to illness.

Meanwhile, the U.S. reported January Non-Farm Payrolls, which came in at +467k, which was well ahead of expectations of around 150k. The divergence between the U.S. and Canada is directly tied to the level of lockdowns, with the U.S. largely open for business, while Ontario and Quebec spent much of January locked down.

RBC Economics believes that despite the divergence in results, both Canada and the U.S. remain on track to begin raising interest rates over the next couple of months.

Market Update

Another wild week in terms of volatility. The biggest news came on the earnings front with Meta (formerly Facebook) reporting disappointing results that saw the stock lose ~$250 billion of market cap in a single day. To put this number in perspective, the Royal Bank of Canada is the largest Canadian company by market cap with a market capitalization of ~US$165 billion, meaning that Meta lost ~1.5 Royal Banks on Thursday.

Our views on 2022 remain unchanged – we expect it overall to be a decent year, as the U.S. economy remains strong (as you will recall, our biggest market concerns center around U.S. recession risks); however, we expect bouts of volatility as rate hikes tend to beget volatility.