Oil, the reopening of economies, and Earth Day

Apr 24, 2020 | Elinesky Schuett Private Wealth Management


It would have been reasonable to expect this week to be unkind to Canadian investors. Yet, equity markets were relatively flat overall and remain well above the lows seen a month ago. We provide some thoughts below.

Also included in this blog post are links to the latest 10-Minute Take podcast, details on a new audio series for small business owners, and information about RBC’s “e” for a tree Earth Day campaign.

Oil steals the spotlight

The week began with news that a widely followed crude oil price, called West Texas Intermediate (WTI), fell into negative territory for the first time in its history. It may be worth explaining that there is no single WTI price but rather one for each month in the future, with the upcoming monthly contract being the price that is often the most widely quoted. Oil producers and buyers use these contracts to negotiate transactions - buying, selling, and hedging - of oil on a monthly basis. The price for the May contract (which expired this week) fell below zero. Prices for contracts for future months also fell, but by meaningfully less and remain in positive territory. The driver of the weakness is twofold: limited available storage capacity as inventories at major hubs have grown in recent months and demand that has been extraordinarily weak as a result of the global economic shutdown.

The implications are undeniably negative for the energy industry and Canada, whose economy and stock market remain dependent on oil. But, while negative prices may be new, low prices are not. And sentiment around energy has arguably been very poor for some time. This may help to explain why the energy sector, the stock market, and the Canadian dollar held in relatively well given the circumstances.

Looking into May, the prospects for oil remain challenging but there may be some relief on its way. More regions may begin to gradually reopen their economies, helping reignite some demand. Meanwhile, the supply side should also improve as recently agreed upon production cuts from global producers like Russia and Saudi Arabia should begin to kick in.

Coronavirus and the reopening of economies

The positive trend of stable to lower new daily coronavirus cases across Europe and North America continued this week. Yet, when looking at the details, trends remain very specific to each region. For example, in Canada, many provinces continue to show declining new daily cases. But, new cases in Quebec and Ontario remain stubbornly high. A similar story exists in the United States, where New York has shown signs of progress despite the fact the number of cases remains elevated, while other states have seen a jump in new daily cases. The approach to reopening economies is therefore likely to vary by region and be gradual in nature. Furthermore, reopening may likely be accompanied by preventative measures that include ongoing social distancing, wearing of protective gear, and mass testing. In other words, while the removal of lockdown measures appear to be on the horizon, a full return to pre-crisis activities appears to still be a ways off.

Elsewhere, the emerging markets – Turkey, Brazil, and countries across Africa – remain a source of concern. Case count trends are accelerating in these regions and many may not have the benefit of the kind of health care infrastructure needed to deal with a crisis of such magnitude. While trends in these places may not directly impact our own path to economic recovery, they will undoubtedly have an influence on how global markets behave.

Despite high uncertainty, equity markets have rebounded sharply since the lows reached in March. Much of this can be attributed to the decisive actions taken by governments and central banks that should help businesses, consumers, and households that are facing economic hardship. The hope is that the global economy can begin to heal by the summer. As a result, it remains important to monitor developments in the weeks to come to gauge whether the assumption of such an upturn is appropriate.

10-Minute Take

In addition to the commentary above, there is a new 10-Minute Take podcast available for you to listen to on our website: What the collapse of crude prices means for the oil market.

Here is the direct link to the 10-Minute Take.

#SmallBusinessMatters: Keeping the Heart of the Canadian Economy Beating

There is a new podcast series available online that focuses on small businesses in Canada.

In this 10-part podcast series, Tony Chapman, Canadian marketing and business leader, talks with Canadian entrepreneurs about how their lives have changed since COVID-19. They dive into the challenges facing entrepreneurs to provide timely insights, ideas and much-needed inspiration.

Here is the direct link to #SmallBusinessMatters.

Mixed Signals

The latest thoughts from RBC Wealth Management’s Global Portfolio Advisory Committee on how COVID-19 is impacting the economy and markets.

The rate of new COVID-19 infections appears to be slowing in North America and Europe, and equity markets have made up much of their lost ground. But even as markets anticipate that major economies will start to reopen sooner rather than later, the historic plunge in the price of crude oil highlights the complex challenges facing major economies. We appraise the evolving situation and the implications for equities.

You can read the full market update online: Mixed Signals.

Are you online? Join our “e” for a tree campaign

In celebration of Earth Day 2020, together with the RBC Foundation, we are pleased to announce our partnership with Tree Canada.

We will plant a tree in your honour through Tree Canada’s National Greening Program when you do any of the following:

Enrol in DS Online to quickly and easily access your important account information, send and receive secure messages from us, and much more – all through your computer, tablet or mobile device. You can sign up by clicking here.

Switch to paperless eDocuments to safely view your account statements, tax documents, trade confirmations and more through DS Online, instead of receiving printed copies in the mail. Here’s how to sign up.

Set up online banking so you can transfer the funds you need between DS Online and RBC Online Banking, without ever having to leave your home. Here’s how to get started.

By switching to eDocuments, you can help achieve our goal of reducing our paper production by 1,547.75 metric tonnes. Plus we will plant a tree in your honour when you switch before August 30, 2020.

It’s easy to get set up for our online services. Simply contact us and we will walk you through the process! You can call 519-822-2024 or email elineskyschuett@rbc.com.

Happy Birthday Guelph! The City of Guelph turned 193 years old yesterday.

We thought we’d share a few fun-facts about Guelph to help celebrate.

  • Guelph was founded on St. George’s Day, April 23rd, 1827 with the ceremonial felling of a large maple tree.
  • The wire coat hanger was invented in Guelph in the 1920s, probably by Steele’s Wire Spring Company.
  • Colonel John McCrae, who wrote the poem “In Flanders Fields” was born and raised in Guelph.
  • The number “64” on the cap of Sleeman Cream Ale bottles is the page number of the recipe from the book belonging to the great grandfather who started the company in 1832.
  • Led by potato breeder Dr. Gary Johnston, a research team at the University of Guelph created the Yukon Gold, the first Canadian-bred potato to be marketed and promoted by name. It received a Canadian license in 1980.

Source: https://guelph.ca/living/about-guelph/

Our community

We continue to share the positive stories from in and around our community each week - We hope that you enjoy them!

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.