Global markets continued their decent this past week giving pause to the market’s rally. A laundry list of items were to blame, including a number of U.S. monetary policymakers who pleaded for Congress to pass more fiscal stimulus, concerns over the potential of a contested U.S. election, a noticeable slowing in European services activity, covid-19 case trends and the potential for more government restrictions. Market volatility did move modestly higher recently though remains below the levels of early September when weakness first emerged.

 

While all the issues listed above are worthy of further discussion, the virus remains the predominant driver of the global economic and market trajectory and we can’t leave out Justin’s throne speech.

 

Coronavirus update

The rate of new infections in Canada continued to accelerate over the past week with the country seeing its 7 day moving average surpass 1100 versus 800 the previous week. From a provincial perspective, Quebec and Ontario remain the hot spots, with the fastest growth rates. The average of daily new infections in both provinces is approximately 460 and 386, respectively. British Columbia and Alberta also saw an increase, but the rate of change is well below the other two. Meanwhile, Saskatchewan and Manitoba were relatively stable in terms of change in trend. The east coast and northern territories have generally seen no pickup whatsoever compared to the rest of the country.

 

Elsewhere, developments have been mixed. Europe continues to grapple with its second wave. Argentina and Israel are reporting near record levels. And, the United States has seen a stalling in its declining trend, though it appears to have flat lined as opposed to move higher.

 

But, some signs of progress have emerged in developing countries such as Brazil and India. The former has seen its new cases steadily decline since August, with well below 20,000 new cases per day now being reported. And India, whose case numbers seemed out of control just a few weeks ago (at more than 90,000 cases per day) has seen its moving average noticeably decline over the past week. The figures remain elevated but the trends provide some glimmers of hope for these hard hit nations.

 

The implications of our government’s plan

The minority Liberal government delivered its much anticipated throne speech this past week. Given the emergence of a second wave of the coronavirus in Canada, it was not necessarily surprising to see a heavy focus on the various programs put in place to continue to support the unemployed and businesses that are being impacted by the pandemic in order to buy more time for the economic recovery. Legislation was announced to increase the Canadian Recovery Benefit - a move clearly intended to convince the opposition NDP to back the Throne Speech and increase Justin’s odds of surviving a parliamentary confidence vote in the days to come.

 

The support programs include:

 

• Canada Emergency Wage Subsidy – extended from December through until next summer, essentially pays a sizeable portion of an employee’s salary for eligible businesses.

• Canada Recovery Benefit – available for 26 weeks to workers who are self-employed, gig, or contract workers. Was initially promised to be $400 per week but was raised to $500 in an attempt to secure support from the NDP party.

• Canada Recovery Sickness Benefit – applicable for those that do not have paid sick leave, will provide $500 per week for up to 2 weeks.

• Canada Recovery Caregiving Benefit – applicable to those that have to stay home to care for someone because alternatives are not available due to the pandemic, will provide $500 per week for up to 26 weeks.

 

In addition to the above, some changes were made a month ago to the Employment Insurance (EI) program that should allow more people to quality. This is important as many participants of the Canada Emergency Response Benefit, which is on the verge of expiring, are likely to transition to EI.

 

There will be concerns about the cost of these programs as the fiscal deficit was already expected to be the largest this year since the Second World War. Moreover, the government will be funding this spending with increasing amounts of debt. But, these measures are undoubtedly required to help the many households and businesses endure through this period of economic stress. Austerity and fiscal restraint will come at some point in the future. Canada won’t be alone in confronting that longer-term challenge as most other countries have had to undertake similar spending to deal with the impact the pandemic has had on their own economies.

 

10182203. you are likely to be bombarded over the coming weeks from any news portal, social media platform, or person with an opinion, I will start focusing more attention to the U.S. and the presidential election. The first of three presidential debates takes place on September 29^th, and the noise will likely last longer. In the meantime, and to shift to something more uplifting, it was announced that Justice Ruth Bader Ginsburg will lie in state at the US Capital. The announcement is quite substantial on many fronts and bears recognition, as it marks the first time since 1930 that a US Supreme Court Justice received such an honor. However, and more importantly, RBG will be the first American women to lie in state since the tradition started in 1852.

 

Recipe teaser

The afternoons are still quite pleasant but the brisk mornings serve as a good reminder that fall is in full event and winter is around the corner. Nonetheless, this remains one of my favorite times of the year and, to get a head start on duck or lamb accompaniments, I am going to attempt making Potato Pave - a recipe made famous by Thomas Keller of the French Laundry. If all goes well, and my fingers remain intact, I will post the recipe in the coming weeks.

 

Please let my team and I know if there is anything we can do to assist you. Shannon, Tom, and I all stand ready to listen and speak with you. We can also be made available to speak with any family or friends who may need reassurance during these times.

 

I hope that you have a great weekend and, remember, only three months till Christmas.

 

Devin