Canada’s fiscal snapshot

Jul 10, 2020 | Elinesky Schuett Private Wealth Management


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This week, we saw fairly stable market activity as economic data showed further improvement despite the ongoing rise in global coronavirus cases and Canada’s fiscal update.

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This week, we saw fairly stable market activity as economic data showed further improvement despite the two factors discussed in greater details below: the ongoing rise in global coronavirus cases and Canada’s update on how the pandemic has impacted the country’s fiscal situation. We’ve also included a new video tour of  RBC Wealth Management Online to help you navigate the new site. Your links to the latest 10-Minute Take podcasts and our Community Corner are also featured in this blog post.  


Coronavirus update

The number of new cases across Canada continued to be generally stable or falling as reopening measures were launched or expanded. All provinces and territories seem focused on continued monitoring, and appear to be taking a cautious stance towards adopting the phases they’ve outlined to return to fully-operational economies.

The U.S. hit a grim milestone this week, with confirmed cases climbing above 3 million. Southern states, including Florida, Texas, Louisiana and Arizona, are current hot-spots within the country. However, more than two dozen states have reported increases in daily case counts this week while infection rates as a percentage of tests administered has also increased. This recent surge in the U.S. comes as many states remain focused on keeping their local economies open. As the healthcare system becomes strained in certain regions, we expect local officials may need to balance reopening strategies with public health priorities and trying to contain many of these new outbreaks while preventing others.

Globally, many countries are also navigating the challenges associated with economic ”reboots”, with Australia re-imposing lockdown measures in Melbourne, Greece discussing reintroducing restrictions, and Serbia’s population mounting protests in response to new curfews. Brazil continues to be hard hit by the virus, as confirmed cases surged past 1.5 million earlier this week, second only to the U.S. in total number of infections. Meanwhile, in many other regions, including on the African continent, in Latin America, and in India, case counts continue to grow.

Fiscal snapshot and economic data

Bill Morneau, Canada’s Minister of Finance, presented a fiscal and economic snapshot of Canada on Wednesday, sharing that the estimated federal deficit for 2020-2021 will be a staggering $343.2 billion. This marks a sharp deterioration from last December’s expectation of a $28.1 billion deficit. The government expects Canada’s GDP to plunge 6.8 percent in 2020, followed by a reasonable recovery of 5.5 percent growth in 2021.

The announced deficit is driven by many factors. Stimulus is a key contributor, with total announced stimulus spending for 2020 totaling nearly $230 billion. Lower revenues and higher expenses are also meaningful contributors, both brought on by the economic disruption from COVID-19. Alternatively, lower interest costs on public debt from interest rates that have fallen sharply, will lead to savings of approximately $4 billion.

Morneau made it clear in his update that there remains a high degree of uncertainty around the economic recovery – both the speed and the degree to which it will occur. Currently, the Federal government is relying heavily on public debt to cover spending, but they will need to be careful in managing this over the months to come. While the snapshot helped to provide some clarity on Canada’s current economic and fiscal situation, we would like to see more actionable guidance from the Federal government regarding how they plan to manage stimulus/aid programs in concert with the compromised fiscal position.

Despite worrisome trends in the resurgence of the pandemic in the U.S. and elsewhere in the world, economic data releases this week continue to point towards recovering activity. The U.S. ISM Non-Manufacturing Purchasing Managers Index (PMI), initial and continuing jobless claims, Eurozone retail sales, and the Canadian Ivey PMI all came in better than expected.

The improving tone in the economic data, together with cautious optimism surrounding the progress of developing a vaccine, remain key pillars supporting the “risk on” sentiment in the financial markets. While markets have exhibited resilience in recent weeks, we remain conscious of several risks that could keep volatility elevated in the months ahead.

 

The Wealthy Barber on the markets, economy and the current business environment

You can watch The Wealthy Barber in his latest interview on our website. This timely interview is part of a series created in collaboration between RBC Wealth Management Royal Trust and David Chilton, author of best-selling personal finance guides The Wealthy Barber and The Wealthy Barber Returns, and former dragon on CBC’s Dragons’ Den.

“I'm still a long-term optimist, there are definitely challenges out there now, but I feel good about where we're headed.” – The Wealthy Barber


 

10-Minute Take

There are two new 10-Minute Take podcasts available on our website.

Canada’s fiscal snapshot – massive deficit, record federal debt

The COVID crisis delivered a bigger shock to our economy than most expected. Ottawa is forecasting an enormous $343 billion deficit in 2020, which pushes the federal debt load past the $1 trillion mark for the first time. With the worst behind us, the focus now is how to sustain the early economic recovery and especially, how to get Canadians back to work. Can Canada take on more debt without further risking our sovereign credit rating? And how will the federal government transition people from the CERB relief program to more productive wage subsidies or other schemes? Craig Wright, RBC’s Chief Economist, shares his take on Canada’s fiscal snapshot.

Can U.S. markets stay up while summer shutdowns expand?

The U.S. gained nearly 5 million jobs in June, but that was before the latest COVID-19 outbreaks. Now, state re-opening plans are being put on hold, if not dialed back – with almost certain economic consequences. And yet, markets are partying like it’s 2019 – Dow Jones had its best quarter since 1987, Nasdaq hit a record high. But just how far will the Fed go to support the economy? And will markets get a reality check? Tom Porcelli, RBC Capital Markets’ Chief U.S. Economist, shares his update on the U.S. economy.

You can listen to these 10-Minute Take podcasts online now: The 10-Minute Take.


Virtual Tour of RBC Wealth Management Online

Have you seen the new WM Online? A new video is available that will take you through a virtual tour of WM Online. As an added bonus, this video is separated by topic to save you time if you’re looking for something specific!

Our team is always available to help you if you have any questions or if you are experiencing difficulty with the new WM Online site. Please call us at 519-822-2024 – You can also reach out to the WM Online Helpdesk at 1-888-820-8006 if you have questions or comments about the new site.

 

Watch time: 23 minutes, 11 seconds

Improvements are being made to make the site easier to use!

Here are some of the improvements that are currently being worked on:

  • Making Watchlists easier to use
  • Improving the Print Page design so you can view the information more easily
  • Ensuring that the values on RBC Online Banking and RBC Wealth Management align
  • Addressing the scenario where some clients are unable to access their Documents
  • Adding the “$ Change” column to your Intraday Holdings page by default
  • Showing Intraday holdings by default when viewing the Holdings page
  • Introducing multi-currency display on your Homepage

Community Corner

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

RBC Royal Bank is also sharing stories from across Canada with their Random Acts of Canadian program. You can share your story, or read stories from people across Canada who are helping others in their communities.

Visit randomactsofcanadian.com for more information.

 

As always, we are available to connect with you personally. Please don’t hesitate to contact us at 519-822-2024 or elineskyschuett@rbc.com.