Good morning,

It was a beautiful weekend here in Ontario, it’s such a beautiful time of year – one that we should ensure we enjoy as we head into, what could be, a long “stormy” winter. As we get through hurricane season we all seem to be dealing with a storm that seemingly has no end.

Despite the fact that we all want to fast-forward time to a time where Covid-19 is behind us, remember that life is still precious and we all need to enjoy the moments. We will persevere as these storms will never last forever.

“Rivers know this: there is no hurry. We shall get there some day.” A.A. Milne, Winnie-the-Pooh

And now, to the markets….

We are looking green today, as the market looks to recover from some of the weakness global markets experienced the last few weeks. A laundry list of items were to blame last week, including a number of U.S. monetary policymakers who pleaded for Congress to pass more fiscal stimulus, concerns over the potential of a contested U.S. election, a noticeable slowing in European services activity, covid19 case trends and the potential for more government restrictions. Market volatility did move modestly higher recently though remains below the levels of early September when weakness first emerged. This suggests market action remains orderly.

All the issues listed above are worthy of further discussion, but I thought I’d focus our commentary this morning on a virus update as it remains the predominant driver of the global economic and market trajectory in our view. We also address the implications of the throne speech from the Canadian government.

Coronavirus update

The rate of new infections in Canada continued to accelerate over the past week with the country seeing its 7 day moving average surpass 1100 versus 800 the previous week. From a provincial perspective, Quebec and Ontario remain the hot spots, with the fastest growth rates. The average of daily new infections in both provinces is approximately 460 and 386, respectively. British Columbia and Alberta also saw an increase, but the rate of change is well below the other two. Meanwhile, Saskatchewan and Manitoba were relatively stable in terms of change in trend. The east coast and northern territories have generally seen no pickup whatsoever compared to the rest of the country.

Elsewhere, developments have been mixed. Europe continues to grapple with its second wave. Argentina and Israel are reporting near record levels. And, the United States has seen a stalling in its declining trend, though it appears to have flat lined as opposed to move higher.

But, some signs of progress have emerged in developing countries such as Brazil and India. The former has seen its new cases steadily decline since August, with well below 20,000 new cases per day now being reported. And India, whose case numbers seemed out of control just a few weeks ago (at more than 90,000 cases per day) has seen its moving average noticeably decline over the past week. The figures remain elevated but the trends provide some glimmers of hope for these hard hit nations.

The implications of our government’s plan

The minority Liberal government delivered its much anticipated throne speech this past week. Given the emergence of a second wave of the coronavirus in Canada, it was not necessarily surprising to see a heavy focus on the various programs put in place to continue to support the unemployed and businesses that are being impacted by the pandemic in order to buy more time for the economic recovery. Interestingly, there was a change to one particular program (explained below), which may be enough to secure the support from the NDP party. If the Liberals want to survive a parliamentary confidence vote in the days to come, they will need the NDP given the Conservatives and Bloc Québécois have suggested they are not likely to be supportive.

The support programs include:

• Canada Emergency Wage Subsidy – extended from December through until next summer, essentially pays a sizeable portion of an employee’s salary for eligible businesses.
• Canada Recovery Benefit – available for 26 weeks to workers who are self-employed, gig, or contract workers. Was initially promised to be $400 per week but was raised to $500 in an attempt to secure support from the NDP party.
• Canada Recovery Sickness Benefit – applicable for those that do not have paid sick leave, will provide $500 per week for up to 2 weeks.
• Canada Recovery Caregiving Benefit – applicable to those that have to stay home to care for someone because alternatives are not available due to the pandemic, will provide $500 per week for up to 26 weeks.

In addition to the above, some changes were made a month ago to the Employment Insurance (EI) program that should allow more people to quality. This is important as many participants of the Canada Emergency Response Benefit, which is on the verge of expiring, are likely to transition to EI.

There will be concerns about the cost of these programs as the fiscal deficit was already expected to be the largest this year since the Second World War. Moreover, the government will be funding this spending with increasing amounts of debt. But, these measures are undoubtedly required to help the many households and businesses endure through this period of economic stress. Austerity and fiscal restraint will come at some point in the future. Canada won’t be alone in confronting that longer-term challenge as most other countries have had to undertake similar spending to deal with the impact the pandemic has had on their own economies.

We are likely to turn our attention from Canada to the U.S. and its presidential and congressional elections. The first of three presidential debates takes place soon (September 29th) and the noise could last longer than it otherwise would as there is some risk of a contested outcome. I’ll discuss this more in next Monday’s Morning Memo

Until then, enjoy the moments and remember that our actions today make for a better tomorrow.

“Even if I knew that tomorrow the world would go to pieces, I would still plant my apple tree.” Martin Luther

Be well & enjoy the moments Derek