In addition to the market update and commentary on the status of the pandemic that is featured weekly, we have also included your RSVP reminder for our upcoming event 2020 Vision: Economic Update with Brad Willock, and links to the latest 10-Minute Take podcasts and our community corner.
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, and also discuss the noteworthy move in the Canadian dollar.
A second wave of the coronavirus has been a concern since the beginning of this pandemic. Unfortunately, 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 behaviour that had existed across many American cities in recent months. There is no guarantee of a rise in infections once the incubation period expires in a week or two. In fact, 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 another positive catalyst for stock markets. But the mass gatherings have created multiple opportunities for the virus to spread and re-emerge as a more serious risk. While markets do not appear very concerned about this, we believe it is something that bears watching.
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 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.
The rebounding economy
Millions of people lost their jobs across North America over the past month. This is on top of the millions that were lost in April. That paints a rather depressing and real picture of the current state of the economy. But, markets tend to be less concerned about the present 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, suggesting 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.
Statement from RBC CEO Dave McKay
Read the full statement from RBC CEO Dave McKay, including RBC’s commitment to take more meaningful action to support our communities: https://read.rbcwm.com/3gIOWDY
Get ready for the new RBC Wealth Management Online
Coming Saturday, June 6. The new RBC Wealth Management Online is a completely new secure online services website that will replace our website, DS Online. With the new RBC Wealth Management Online, you will see major upgrades that make it even easier to keep track of your investments safely from your home computer, tablet, or mobile device.
Get more information here: Get ready for the new RBC Wealth Management Online!
Elinesky Schuett Speaker Series
2020 Vision: Economic Update with Brad Willock
Thursday, June 11, 2020 1:00 – 2:00 p.m.
Brad Willock, Vice President and Senior Portfolio Manager, U.S. Equities with RBC Global Asset Management, will join us for a live online economic update on June 11, focusing on the U.S. market during this global pandemic.
Don’t forget to RSVP by June 10 by clicking on the button below.
Have a question for Brad? Submit your questions with your RSVP!
There are three new 10-Minute Take podcasts available on our website.
To recover, Canadian tourism needs more Canadians
Summer is around the corner, but the forecast for the tourism sector is less-than-sunny. With border and travel restrictions still in place (even between provinces), families wishing to travel have fewer options than before. Maybe take a road trip around your province. Maybe rent out an Airbnb for a month. Whatever Canadians choose, it will be a boon to Canadian tourism, which has historically depended more on domestic than foreign visitors. But will summer road trips be enough to save the sector? Nathan Janzen, RBC Senior Economist, shares his outlook on tourism.
A U-turn for the auto sector?
In a bygone era, the Sharing Economy had spelled out the death of the personal car – why have your own vehicle when you could just hail an Uber or Lyft? But the auto sector might see some green lights ahead, as people shift from shared transportation towards their own cars. How is COVID changing how (and whether) we drive? And does it put the brakes on trends such as autonomous vehicle technology? Joe Spak, RBC Capital Markets’ U.S. Auto Sector Analyst, shares his take on the future of cars.
How the lockdown may hamper Canada’s immigrant-fueled growth
2020 was supposed to be a record year for newcomers to Canada – what the country needed to offset an aging population. But then COVID happened. The lockdown, of course, didn’t only restrict the movement of people – it dealt a serious blow to Canada’s labour market with knock-on effects to other parts of the economy. How are sectors that depend on immigrants, such as agriculture and healthcare, faring? What are the broader consequences if newcomers stop coming? Dawn Desjardins, RBC’s Deputy Chief Economist, shares how the drop in immigration levels is impacting our economy.
You can listen to these 10-Minute Take podcasts online now: The 10-Minute Take.
Audio commentary: The road to recovery for the U.S. economy
Tom Porcelli, a Managing Director and Chief U.S. Economist at RBC Capital Markets, joins Janet Engels, Head of the Portfolio Advisory Group – U.S., to discuss the post-COVID-19 U.S. economic recovery. Their conversation examines the key economic data, the outlook for employment and consumption, and the effect of stimulus measures. They also explore whether negative interest rates are a possibility in the U.S.
Listen here (approximately 26-minute duration).
Happy National Doughnut Day!
Over the past few months, we have seen local businesses get creative in the ways that they provide their services. In mid-April, we shared a story on our Facebook page about Jay Elinesky and the Crafty Ramen dinner kits. Just in case you missed the original post, here’s the link.
Although we have seen some businesses struggle during this time, we are very fortunate to have extraordinary entrepreneurs in our community that are pivoting so quickly to meet the ever-changing dynamic that is 2020.
Sweet Temptations, located on Gordon Street in Guelph, has gotten very creative in their product offering. More than once, they have tempted our sweet tooth with their delicious creations and their cookie and doughnut decorating kits.
As today is National Doughnut Day, we thought it was time to try one of those doughnut kits! What better way to celebrate than to support a local business and create positive memories in a time of uncertainty. Tom Schuett and his family spent the morning creating these spectacular doughnuts, which were quickly gobbled up!
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!
As always, we are available to connect with you personally. Please don’t hesitate to contact us at 519-822-2024 or firstname.lastname@example.org.