Is Europe on the mend? It may be too early to conclude that
it is past the worst of this second wave of the pandemic. After all,
hospitalizations and deaths reached new highs across a number of
countries over the past week. And the upcoming holiday season could
complicate things. But, a number of countries - Belgium, France, Czech
Republic, Slovakia, Poland, and the Netherlands – reported lower new
daily infections over the past week. Elsewhere, data has been mixed
across the region but there does appear to be greater stability, which is
not necessarily surprising given the very restrictive measures put in
place a few weeks ago.
its new daily infections increase this past week. But, it too has seen
the pace of new infection growth slow. Its 7-day moving average of new
daily infections is now nearly 4,750 versus the 4,450 from a week ago.
Saskatchewan and British Columbia led the way this past week with the
highest rate of growth in new daily infections, prompting both
governments to raise new restrictions around mandated mask wearing and
travel. Alberta and Ontario saw increases, but they were relatively
modest. Manitoba saw limited change over the past week, which was a
welcome break given it continues to grapple with the highest infection
rate per capita in the country. Quebec saw a fall in new infections.
Unfortunately, the East Coast, which had up to this point largely avoided
the second wave has now seen its numbers move higher, though the figures
remain low relative to other provinces.
In the U.S.,
the number of new daily cases continued to march higher. The crisis is
widespread and has escalated in some states, forcing some governments to
take more restrictive action. With U.S. Thanksgiving less than a week
away, we see limited scope for improvement over the next few weeks.
Vaccines on the horizon
There is rising optimism on the vaccine front. Over the past
week, there were positive updates on three candidates.
BioNTech completed their Phase 3 trial and confirmed that their candidate’s
efficacy rate was 95%. Interestingly, the efficacy was nearly as high for
adults over the age of 65 as it was for younger people. The companies
will be applying with U.S. regulators for “Emergency Use Authorization”,
paving the way for some of the first millions of inoculations by the end
of this year.
whose vaccine uses similar technology, provided a positive interim
update, indicating its vaccine is nearly 95% effective as well. It will
likely conclude its Phase 3 trial in the coming weeks and file with
regulators with the hopes of having 20 million doses available for
emergency use by year-end.
Oxford University, in partnership with pharmaceutical company
AstraZeneca, indicated that its candidate is showing promising results in
its trial, in younger and older populations. Its vaccine is based off a
more traditional approach to vaccine development, using a weakened
version of a common cold virus found in chimpanzees.
Earnings resilience and outlook
The developments above increase the odds of having multiple
vaccines available for use across the developed world as early as the
spring. As a result, we have increasing confidence that a more
sustainable recovery in the global economy and corporate earnings may be
in store for the second half of next year and beyond.
despite the global pandemic, earnings this year have been more resilient
than expected. Profits have indeed fallen given the shutdown of the
global economy and the many restrictions that are in place across parts
of the world. Companies in the S&P 500 - the U.S. equity market - for
example, are projected to see their aggregate earnings decline by almost
16% in 2020. Yet, that decline is better than the average decline of 18%
seen in the 11 recessions experienced in the U.S. dating back to 1948.
there are many companies and entire industries that are struggling, with
significant declines in their business results – travel, leisure, some
retail and restaurants for example. And there are others that have seen
the opposite, as they have benefitted from the unusual environment –
ecommerce, home improvement, and telecommunications for example.
Moreover, the record amounts of aid supplied by governments around the
world have offered meaningful support to consumers, households, and small
businesses. In other words, not all companies and industries have proved
to be as sturdy, and government support has likely inflated the level of
profitability to some extent.
we believe the better than expected earnings trends this year in the face
of a global pandemic serve a reminder that there is an inherent
resilience across economies and businesses that can often be
underappreciated. That is an important lesson to take away for the next
crisis we may be faced with at some point in our careers.
have any questions or concerns, please feel free to reach out.