Coronavirus and exit strategies

Positively, the trend of decelerating new case counts across countries like Italy, Spain, and Germany continue, enabling them to slowly ease certain lockdown restrictions. Meanwhile, there are encouraging signs that North America may be close to entering this new phase, though it feels premature to say this conclusively. But, there remain other countries – the United Kingdom, France, Turkey, India, and Brazil for example – where new case count has not shown evidence of slowing. Furthermore, Japan and Singapore have seen a reacceleration in cases forcing an escalation of restrictive measures. Nevertheless, the question appears to be gradually shifting from “when will we see a peak in the rate of daily new cases” to “when, how, and to what degree will the lockdowns and social distancing measures get lifted”? The U.S. federal government unveiled a “3 phase” approach to easing its restrictions with guidelines and case trends and testing criteria. It also confirmed it is up to U.S. state governors to decide when and ultimately how to take action.

 

The progress is encouraging given the outlook was relatively bleak just a few weeks ago. But, it remains to be seen how quickly people’s behaviour may return to “normal” until effective treatments or vaccines are readily available. On this front, there have been encouraging developments as well but it is likely too speculative at this point to make any conclusions.

 

Oil agreement has limited impact for now

In March, oil prices fell dramatically as a result of a combination of the pandemic and a standoff between two of the world’s largest oil producers: Saudi Arabia and Russia. Under meaningful pressure, they, along with a number of other oil producing countries, came to an agreement over the past week on coordinated production cuts that last through 2022. The market’s reaction was muted as investors are rightfully preoccupied with weak demand that is occurring as a result of the global economic lockdown. But, this agreement is very important in that it should help avert a worst case outcome - breaching the global storage capacity - that could have resulted in even greater pressure on oil prices.

 

Earnings come in to focus

This week marked the start of the first quarter earnings season. Expectations are low and are even worse for the next quarter given anticipation the global economic weakness may persist for the bulk of April, May, and June. The U.S. banks were the focal point this week as several of them reported results. Unsurprisingly, they were not good. Most are building large reserves of capital in anticipation of future loan losses as unemployment rises and business customers may have difficulty repaying outstanding debt. Fortunately, the North American banking system is much better capitalized compared to the last recession which should help them weather this economic storm. The challenge for investors, and bankers, lies in trying to assess how long this one may last. Should it extend beyond the month of June, more reserves may be needed.

 

Hundreds of other companies are expected to report results and provide updated commentary on the economic backdrop in the weeks to come. It’s hard to imagine these businesses having any more insight into when the economic challenges will subside. As a result, we continue to expect uncertainty and volatility to remain elevated for the time being.

 

Audio commentary: COVID-19 update
A conversation with RBC Capital Markets biotech analyst Kennen MacKay

Janet Engels, Head of the Portfolio Advisory Group – U.S., interviews Dr. Kennen MacKay, Managing Director and Co-Head of Biotechnology Research for RBC Capital Markets. Kennen routinely publishes an update on the COVID-19 pandemic and the spread of the virus globally.

 

The conversation will include Kennen’s thoughts on where we are in the spread of the virus and whether signs of a peak in cases are evident. They’ll also talk about what’s needed to reopen the U.S. economy, the lessons we can learn from other geographic regions, and the progress being made on treatments or a vaccine.

 

If you are interested, you can listen to the full audio commentary here (approximately 16-minute duration).

Resources for you

We have created a new page on our website called Resources for You that features links to our latest blog posts and the 10-Minute Take podcasts, along with a library of articles on market volatility. New articles will be added as they become available, but we will also share them with you in our regular emails. You can also join our mailing list online. 

 

We’ve also heard that some of you are forwarding these emails to your friends and family – Thank you! If you know someone who is interested in receiving our newsletters, we’ve added an option on the Resources for You page of our website to allow them to join our mailing list directly.

 

Community corner

Each week, we like to end our emails with a few good news stories from in and around the community. We hope that they brighten your day!

• New community group helps strangers celebrate birthdays with a drive by party
• Agricultural society launches campaign to help feed hungry heroes
• Retired teacher organizes physically distanced physicality for neighbourhood kids
• Guelph Humane Society launches virtual pet adoptions

 

We also couldn’t resist sharing this Facebook post highlighting the resiliency of small business owners – You’ll also see Jay Elinesky cooking in the kitchen! Jay brings home a Crafty Ramen DIY kit.

 

With everyone spending so much time at home, and maybe trying new things in the kitchen like Jay, we thought you might be interested in this great article on how to grow plants from your groceries. If you have any luck with the avocado, we’d love to see pictures!

 

 

As always, we remain vigilant and are available to answer any questions that you may have. Please don’t hesitate to contact us at 519-822-2024 or elineskyschuett@rbc.com.