In our economic update this week, we discuss the alarm caused by the new virus variant and the outlook for Europe given renewed restrictions and lockdowns. We have also included the latest economic update from RBC Global Asset Management, featuring Eric Lascelles, Economic considerations from B.C. floods, COP26, inflation heat and falling oil prices.
In addition to our economic updates, we’ve included two other interesting articles this week, along with your invitations to two upcoming online events, both on December 7, but at different times:
- Pandemic-driven trends that are here to stay
.: The most recent RBC Small Business Poll shows that some of the trends introduced or accelerated during the pandemic are expected to stick around for the long haul. - How to protect yourself online
.: With the holiday season fast approaching, online shopping can be a convenient way to maintain essential supplies, but it shouldn't come at the expense of your safety. - Event: Guelph Chamber of Commerce Inspirational Women Series, December 7. featuring Emily O’Brien, entrepreneur and founder of Comeback Snacks, a specialty popcorn company that challenges the status quo.
- Event: Ageing with Technology, December 7. With all the digital tools available, how do we and our loved ones navigate, prioritize and budget for the best possible outcomes?
As always, we end our weekly newsletter with a few good news stories from in and around our community.
Your economic update
Global equity markets are ending the month of November on a less than favorable note as the discovery of a new variant of the coronavirus, recently identified in Africa, has created some alarm. It has been reported that this new variant contains an elevated number of mutations that raise questions around its transmissibility and its response to vaccines. Information remains quite limited at this point and, as a result, it is premature to draw any conclusions. Nevertheless, it is fair to assume this development has added a new dose of uncertainty for the markets, at least until more evidence emerges and scientists can assess the variant’s attributes over the days and weeks to come.
There has also been a meaningful increase in COVID-19 infections – of the more established delta variant – in some parts of the world. This is particularly true in Europe, which has re-emerged as the epicenter of the pandemic. Below, we take a closer look at the region, how its economy and market have fared this year, and its outlook going forward.
Understandably, the average Canadian may pay more attention to developments at home, or south of the border, than to Europe. Nevertheless, Europe plays a significant role in the global economy and capital markets. It is the third largest economy in the world, and counts China as its largest trading partner. Meanwhile, this area of the world, including the United Kingdom, represents more than 15 percent of the global equity market. As we saw nearly a decade ago with the European debt crisis, developments in the region can have a meaningful impact in global financial markets.
Europe’s economy has been in recovery mode this year, along with much of the rest of the world. Its manufacturing sector has been strong and stable, driven by a steady demand for goods, while the services side of the economy benefitted greatly this past summer from simply being open. However, two familiar issues present near-term headwinds. First, supply chain challenges are plaguing Germany, the region’s largest economy. Its automotive, machinery, and electronics industries have not been able to meet elevated demand because of the shortages of components and supplies. Labour has also been cited as an issue. Meanwhile, as widely reported in recent weeks, the rising number of new COVID-19 infections across the region has prompted some governments to reconsider various degrees of lockdowns and restrictions, which will inevitably impact parts of the economy as we move through the winter months.
European equity markets have fared well this year, with returns well into the double digits. Similar to other regions, the gains have been driven by strong earnings growth tied to its economic recovery, as well as an accommodative monetary backdrop that has been nurtured by the European Central Bank (ECB). Prior to the pandemic, the region was still dealing with the aftermaths of the aforementioned debt crisis which led to subpar growth and inflation well below targeted levels. Given the circumstances, the ECB, unlike other central banks, has been stubborn and steadfast in its view that monetary policy should remain accommodative to ensure a durable recovery despite the risk of inflationary pressures.
The ECB’s messaging has proven to be reassuring for many investors, but it has come at a cost. The euro currency has depreciated relative to the Canadian dollar year-to-date. The decline is largely because of the view that interest rates will be higher in Canada over the next year driven by a more aggressive Bank of Canada, while rates in Europe are likely to remain close to existing levels. That has driven capital flows into Canada, at the expense of Europe, and the resulting deprecation of the euro has eaten into nearly half of the returns that a Canadian investor would have earned in European equities this year.
The near-term outlook for Europe is undeniably a bit murky given some of the issues the region is grappling with, but for the most part, many of the challenges seem temporary in nature, or have a chance of improving as we move through 2022. The longer-term drivers of equity returns, specifically the economy, earnings, and monetary conditions, should remain supportive for the European market. Moreover, Europe is more heavily tied to the ebbs and flows of the global economy than other regions given its dependence on exports, global finance, industrial activity, and tourism. As the world increasingly gets back to normal levels of activity, Europe should prove to be a beneficiary. It will take time, and there will be hiccups and bouts of uncertainty along the way, such as with the new variant that has recently emerged, but investing requires patience and the discipline to ride through periods of short-term volatility.
Economic considerations from B.C. floods, COP26, inflation heat and falling oil prices
Watch the video online: Economic considerations from B.C. floods, COP26, inflation heat and falling oil prices. |
RBC Small Business Poll reveals three pandemic-driven trends that are here to stay
According to the recent RBC Small Business Poll, the adoption of digital solutions, a focus on wellness and support for local and diverse businesses are among the biggest shifts that took place over the last eighteen months – and these trends are expected to continue long after the pandemic is in the rear-view mirror.
Read more online: Pandemic-driven trends that are here to stay
How to protect yourself when shopping online
Read more online: How to protect yourself when shopping online |
With the increase of food delivery services and free shipping incentives offered by retailers now, consumers are turning to online shopping more than ever. There are still some things to watch out for before you click “checkout.” Here are ways to help you stay safe and reduce risks when shopping online.
You’re invited: Guelph Chamber of Commerce Inspirational Women Series
Please join us on Tuesday, December 7, for the first event in the Inspirational Women Series. We are thrilled to partner with the Guelph Chamber of Commerce to bring this event to our community.
The first speaker in this series is Emily O’Brien, entrepreneur and founder of Comeback Snacks, a specialty popcorn company that challenges the status quo. Emily will be interviewed by Glenna Banda, Executive Director of United Way Guelph Wellington Dufferin about her path towards fighting addiction, starting her own business, and helping to empower individuals with prior convictions to do the same.
Date: Tuesday, December 7, 2021
Time: 9 a.m. – 11 a.m.
Location: Virtual (Hopin, the Guelph Chamber’s preferred video conferencing platform)
Kindly RSVP to elineskyschuett@rbc.com by Friday, December 3. Your email address will be shared with the Guelph Chamber of Commerce to complete your registration. As a guest of Elinesky Schuett Private Wealth Management, your registration is free.
Please note that this event is not hosted on our WebEx platform and your user name may be visible to other participants. Your registration confirmation email from the Guelph Chamber of Commerce will provide you with instructions on how to access the event on Hopin.
For more information about Emily and this event, please visit the Guelph Chamber of Commerce event website: Inspirational Women with Emily O'Brien - Founder, Comeback Snacks
Ageing with technology: Digital solutions for care, control, and connection
During this 45-minute webcast, a panel of experts will discuss how recent developments in technology are addressing some of the key concerns senior adults and their families face across the continuum of care and how individuals can be aware of the options, analyze the choices, and prepare to adopt solutions that best fit their needs. Date: Tuesday, December 7, 2021 Click here to register for this event by December 6, 2021. This event is hosted by RBC Wealth Management. Visit our website for more information about the event and the panel of experts: Digital solutions for care, control, and connection |
Community Corner
Each week, we like to share a few good news stories from in and around the community. We hope that they brighten your day!
- River Run Centre announces 2022 full Spring Season
- 'Good for the soul:' Tree lighting event returns to Market Square
- 'Living Room Suite' offers taste of home in Guelph Sculpture Park
- University of Guelph introducing Black Canadian studies program next year
- Arthur woman receives Women of Inspiration Award
- Adopt-a-Family ‘elves’ busy matching families in need ahead of Christmas
- The Grove offers workshop on having difficult conversations with kids
- 5 things to know about the Downtown Milton HolidayFest
- Guelph/Eramosa kicking off festive season with Christmas in the Park
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.