It was an eventful week. Understandably, many were focused on the social unrest that permeated across the United States. As a result, there was less attention paid to the pandemic and state of the economic recovery. This week, we take a look at developments on both fronts, review comparisons of 1968, discuss the noteworthy move in the Canadian dollar, and learn how Tom and his Traeger Smoker make outstanding Deviled Eggs.
A second wave of the coronavirus has been a concern since the beginning of this pandemic and, the risks of such an occurrence (particularly in the U.S.) have increased. The mass protests across the country have resulted in a sharp unwind of the social distancing behavior that had existed across many American cities in recent months. However, should no spike in new cases ensue, it could suggest the transmission risks have declined, and lead to further easing of restrictions and act as the most significant worldwide event for COVID-19. The first protests started 7 days ago and according Thomas Lee, Managing Partner and Head of Research at Fundstrat Global Advisors, “multiple studies ~92% of those expose to COVID-19 are symptomatic by day 14 (50% by Day 7). Day 14 is June 11th. So if no massive second wave starts by June 11th, we have a definitive break in the transmissibility of COVID-19.”
Meanwhile, new virus case counts in Canada largely remain on an improving trajectory in the two more problematic provinces of Quebec and Ontario. It is worth noting the latter has been plagued by sporadic increases in cases again this week. Meanwhile, in the U.S., overall levels have not changed much week over week but there have been notable increases in cases across California, Arizona, and Alabama for example. Some of this may be attributable to increased testing, but it bears monitoring nonetheless. In Latin America, Brazil continues to report more than 20,000 new daily cases per day, suggesting there is limited visibility around the potential for its peak in new cases. Elsewhere, there were meaningful developments in the Middle East and Asia. Iran appears to be experiencing a second wave, after having reported its largest increase in new daily case counts since March. Meanwhile, Pakistan has also reported a surge. Both are notable as each country appeared to have their outbreaks well under control in recent months. Lastly, India recorded a high in new daily cases this week suggesting it may still be a ways away from containing the virus.
Looking over US headlines from the past seven days, it is hard not to compare or strike similarities to 1968. On April 4, 1968, Martin Luther King Jr., was fatally shot at the Lorraine Motel in Memphis, Tennessee, and furthered shockwaves into a country already on edge. The fatal tragedy fueled protests and uprising across the nation as the United States appeared powerless to protests and riots that consumed over 120 cities. Ironically, the world was also dealing with the H3N2 pandemic that killed approximately 1 million people worldwide and 100,000 Americans. Despite all of this and other events through the year, stock markets separated themselves from economic and civil outlook. In 1968, the S&P 500 fell 9% in the first three months (a far cry from March 2020); however, Energy and Financial sectors were down much more. Nonetheless, March 1968 marked the bottom as markets rallied just over 24% to close out the year.
The rebounding economy
Millions of people have lost their jobs across North America over the past few months. But, markets tend to be less concerned about what’s recently happened and more focused on the future. In other words, it’s the change in trend that is more important for investors. And the change has been positive. Weekly jobless claims for example have now declined for nine straight weeks in the U.S. and there have been early signs of certain jobs coming back as indicated by the recent employment reports out of the U.S. and Canada. This suggests some of the job losses may only be temporary in nature.
Meanwhile, more “real time” or high-frequency data as it is often called is also portraying a slowly improving picture. For example, internet searches for “filing unemployment” have made fresh lows, driving mobility is nearly back to normal levels, the rate of year over year decline in retail sales is improving, and restaurant reservations are trending in the right direction. Even the Bank of Canada this week acknowledged that our country appears to have avoided the worst case outcome. The economic rebound is not just a North American phenomenon as monthly services and manufacturing data across China and much of Europe this week showed evidence of improving over the past month. Much work remains, but the overall trend is improving, rather than deteriorating. And with the prospects of extensions and expansions of aid and stimulus programs across China, Europe, and North America, governments and central banks remain very focused on providing economic support.
The rise of the loonie…or the fall of the U.S. dollar?
The Canadian dollar had quite the week, breaching the $0.74 level for the first time since the beginning of March. But, its move higher may have more to do with the global recovery than with what’s transpiring domestically. While the U.S. dollar has fallen relative to the Canadian dollar, it has also depreciated against other major currencies too. And just as the U.S. dollar strengthens during periods of crisis as investors flock to it for its relative “safe haven” status, it can weaken as investor concern fades and risk appetite rises. We expect the weakness in the U.S. dollar may continue in the weeks to come barring any setbacks in the health crisis. But looking out beyond the next few months, Canada’s domestic challenges – high consumer debt loads, lack of pipeline capacity that exacerbates depressed energy prices, and weaker overall competitiveness levels - remain structural headwinds that may limit any sustainable move higher in the loonie.
Overall, we are encouraged by the broadening rally across equities and currencies, which suggests growing confidence in the economic recovery. Its path and sustainability longer-term remain questions in our minds. A new near-term risk has presented itself in the form of the abandonment of social distancing across the United States. We will be watching closely to see if it results in a re-escalation of the health crisis.
Smoked Deviled Eggs
Tom’ honest nature would tell you that he got the recipe off Traeger’s website, however, our team would be the first to tell you that he just has a knack for any and all things BBQ. Here are his step by step instructions:
Bring a pot of water to boil and preheat your grill to 180℉. Add a dozen eggs to the pot for 9 minutes and then remove to a cold water rinse. When cool to touch, peel and slice the eggs in half and place yolk side up on the grill with two jalapeno peppers. Close the lid to your grill and smoke for 45 minutes. In the meantime, cook two strips of bacon until crispy before cooling and chopping into bits - Tom’s personal preference is to smoke the bacon the day before. After 45 minutes, remove all contents from the grill. Cut the tops off the jalapenos, halve, remove seeds, and dice. Go back to the eggs and scoop out the yolks into a medium bowl. Combined the yolks with the finely, diced jalapenos and bacon bits. Add half a cup of mayonnaise, a pinch of salt, two tsp of white vinegar and mustard, and ½ tsp of chili powder and paprika. Mash the mixture together and fill each egg white with about 2-3 tsp. Garnish with paprika, smoked bacon bits and chopped chives.
Should you have any questions or concerns, please contact Shannon, Tom, or myself as we all stand ready to listen and speak with you. My team and I are grateful to work with our clients and we are also available to speak with any family members or friends who may need reassurance during these times.