A relatively good week for global equity markets

Jan 22, 2021 | Elinesky Schuett Private Wealth Management


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An apple computer sitting on a white desk in a white room. There are books, plants, pens, and a keyboard on the desk. The graphic on the computer is a chart.

This week, our featured economic commentary focuses on the U.S. administration’s climate policy and the impact on the energy sector, as well as our thoughts on the upcoming earnings season. We’ve also included a link from RBC Economics with insight into the recent Bank of Canada rate announcement.

Mark your calendars - There are two event invitations included in our blog this week! Event details and links are below.

  • February 2 at 12 p.m. Cognitive health: Symptoms, safeguards, and support, a discussion on early signs of dementia and support for caregivers

  • February 17 at 1 p.m. Mental health and resiliency in a time of change, featuring RBC Olympian Tyler McGregor

As always, we end our weekly blog with a few good news stories from in and around our community.


Your economic update

It was a relatively good week for global equity markets, led in particular by the global technology sector which ultimately pushed some markets to new all-time highs. Much of the world was understandably focused on the inauguration of the 46th President of the United States, Joe Biden. He was quick to sign a few executive orders, one of which has meaningful implications for Canada. Meanwhile, on the pandemic front, we saw some encouraging early signs of progress in North America. Lastly, the earnings season is underway with companies providing results that thus far have been better than expected. We offer some of our key thoughts below.

 

Coronavirus Update

Canada’s seven-day average rate of new daily infections fell meaningfully for the first time in months. The figure stands at just over 6,000, versus the nearly 7,800 average rate reported a week ago. Moreover, the declines were noticeable across most provinces, with Ontario, Quebec, and Alberta leading the way. Saskatchewan and British Columbia also saw declines. The East Coast remains relatively stable with the exception of New Brunswick, which saw yet another large increase over the past week that may lead to tighter restrictions in the province. While it may be premature to offer a distinct conclusion, this past week delivered the first meaningful sign that perhaps the peak in this second wave in our country may be passing. The U.S. is also seeing progress, with its seven-day average rate of new daily infections falling below 200,000 for the first time in weeks.

Elsewhere, developments remain mixed. For instance, Hong Kong is now implementing new restrictions given a recent outbreak. In Europe, governments have extended lockdowns out of concern that new variants continue to pose a greater risk of contagion. Even Israel, which has vaccinated nearly a quarter of its population, reported record levels of new daily infections over the past week.

Canadian energy in cross hairs of new U.S. administration’s climate policy

During his first day in office, newly elected President Joe Biden acted on his campaign promise to revoke the Presidential Permit for the Keystone XL pipeline project. While not a surprise, the move will no doubt disappoint many whose economic prospects are tied to the Western Canada energy industry and is the latest reminder of the hurdles facing pipeline developments in North America. It should be noted that many industry experts and investors had already discounted Keystone XL’s prospects of completion.  

Nevertheless, the project’s cancellation raises the pressure on some of the other Canadian pipelines under development that are aimed at improving our country’s ability to transport oil to key destination points. One project that comes to mind is the expansion of the federally-owned Trans Mountain pipeline, which proposes to expand the volume of oil that can be transported from Alberta to British Columbia, while offering the additional benefit of access to overseas markets. Its importance has undeniably increased in the wake of the recent U.S. decision.

Banks offer early clues from earnings season

The fourth quarter earnings season, for the period of October through December 2020, is now underway. It’s too early to draw broad conclusions, however many of the U.S. banks have already reported results. In general, they were better than expected, with revenues holding reasonably well given the circumstances and earnings benefitting from less capital being set aside for future loan losses. Despite the positive, the sector sold off modestly. In our view, the modest sell-off is a result of some profit taking after strong returns in recent months. Not surprisingly, most management teams were reluctant to provide much of an outlook as they continue to await more clarity on the pandemic. While the outlook for revenue growth remains murky, we remain confident in the strength of the sector’s balance sheets and the ability to withstand ongoing economic stress that is likely to remain over the near-term.

Broadly speaking, investors expect a very sharp rate of earnings recovery in 2021. The anticipation of this recovery in growth helps to explain why global equity markets are near their highs. Ultimately, the timing and trajectory of the economic recovery remains heavily dependent on the rollout of vaccines and the ability to reach levels of herd immunity. While it will take some time, we continue to see favourable odds of this happening in the year ahead.

Elinesky Schuett Speaker Series: Mental health and resiliency in a time of change

Featuring RBC Olympian Tyler McGregorTwo people at the crest of a snowy mountain.

 

Please join us on Wednesday, February 17 for a discussion about mental health and resiliency. We are excited to be joined by Charmaine Collins from the "How are you, really?" campaign, Cyndy Moffat Forsyth, Director at Integrated Youth Services Network (IYSN), and RBC Olympian, Tyler McGregor.

Full event details and the RSVP link are available on our website: Mental health and resiliency in a time of change

 

BoC holds policy steady amid “stronger and more secure” outlook

There was some speculation that the Bank of Canada would start the year with a “micro cut” (lowering the overnight rate from 0.25% to something like 0.1%) amid near-term downside risks from extended lockdown measures, as well as some recent tightening in financial conditions including a stronger Canadian dollar. But as we expected, the BoC opted against such a policy tweak as a more optimistic medium-term outlook combined with ongoing fiscal support reduced the need for additional monetary policy stimulus. The Canadian dollar’s rise was attributed to higher commodity prices (reflecting improving economic prospects) and a broadly weaker US dollar, though Macklem noted further appreciation could weigh on Canada's exports.

Read the full update from RBC Economics online: BoC holds policy steady amid "stronger and more secure" outlook 

 

Why women need to be more proactive with their brain health

Two women riding bikes on a gravel path beside a lake.

While Canadian women tend to live about five years longer than men, research shows females account for about 70 percent of people living with dementia and brain-aging diseases.

The World Health Organization (WHO) describes dementia as a deterioration in memory, thinking, behaviour and the ability to perform everyday activities. According to WHO, Alzheimer's disease is the most common form of dementia and may contribute to about two-thirds of cases.

Read the full article online: Why women need to be more proactive with their brain health

 

 

Cognitive health: Symptoms, safeguards, and support

A discussion on early signs of dementia and support for caregivers

Senior man using a walker, walking with a middle aged man and a young boy. They are walking on a tree-lined path.

Tuesday, February 2, 2021 | 12:00 PM ET

In recognition of Alzheimer’s Awareness Month, RBC Wealth Management, Royal Trust and the National Institute on Ageing (NIA) are collaborating once again to offer valuable and actionable insights for older Canadians.

During this approximately 45-minute webcast, Leanne Kaufman, Dr. Samir Sinha and Audrey Miller will discuss how:

  • To recognize the early signs of dementia
  • To effectively care for a person in early stages of dementia including making necessary legal and financial arrangements
  • Caregivers can navigate next steps for their loved ones and for themselves

To participate in this virtual event:

  • Click on the “I will attend” link below to register the event. If this is your first event, you will need to provide your name, email and the name of your advisor. Please make sure you set your time zone and your email preferences.
  • You will receive a confirmation of your registration with a link to the event and a booking to add the event to your calendar.

Kindly RSVP by January 29, 2021.

I will attend


Community Corner

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.