“Ego is the enemy of what you want and of what you have: Of mastering a craft. Of real creative insight. Of working well with others. Of building loyalty and support. Of longevity. Of repeating and retaining your success. It repulses advantages and opportunities. It’s a magnet for enemies and errors. It is Scylla and Charybdis.” Ryan Holiday

Good morning,

After an amazing weekend of weather here in Ontario, it was nice to pull ourselves away from the election drama and enjoy some fall weather.

It certainly was that, an entire week full of speculation and drama. Yet, the biggest surprise was not the U.S. elections. Rather, the unexpected collapse in volatility in the days that followed that spurred a sharp global equity market rally.

At the time of writing this morning, the S&P futures suggests that a new all-time record, for the first time since early September, is a real possibility today, This is happening on the back of the Biden victory, despite the uncertainty that still lies in front of us.

Given the optimism we are feeling at the moment, and President Trump’s response to the election results, the concept of ego is worth us reflecting. In today’s world, our ego should be keenly focused on our ultimate responsibility, one of family, community and self-betterment.

“In a democracy, the individual enjoys not only the ultimate power but carries the ultimate responsibility.” Norman Cousins

As we head into the week, a few themes we can focus on that can help ensure we are moving forward towards opportunity:

• Live with purpose, not passion
• Always be a student
• Talk less, do more

“Receive without pride, let go without attachment” Marcus Aurelius

And now, to the markets….

U.S. elections

The market action last week was surprising to many. Yet, it is worth remembering the lead up to the U.S. elections involved some pain for investors. Prior to this week, volatility had jumped and global equities sold off based on a variety of concerns: a second wave of Covid that has been spreading faster than expected and the elections. On the latter, the worry was twofold: the risk of a contested outcome and investor anxiety over a “blue wave” scenario in which the Democratic Party would control the presidency and both chambers of Congress. This potential outcome presented the risk of more sweeping policy shifts such as the removal of tax cuts implemented a few years ago and a heightened regulatory environment. The results to date suggest the odds of a “blue wave” have fallen meaningfully, helping to reassure investors despite some uncertainty around the elections that remain.

We appreciate the degree of election fatigue that now exists and there’s a high likelihood of recounts. And, several legal challenges have already been submitted in many of the battleground states, including Georgia, Michigan, Wisconsin, and Pennsylvania. Now, I’m no litigation expert, and so it is difficult to offer much of an assessment. Nevertheless, we expect this to drag on longer than we would have preferred……yuck

Implications going forward

It may seem premature to discuss implications of an election that has yet to conclude. Yet, there is more clarity today than a week ago given the likelihood of a divided Congress. First, the probability of a large and far-reaching round of fiscal stimulus appears to now be off the table. Instead, a smaller package is more likely as both parties will have to come to an agreement. Meanwhile, any plans to increase taxes on corporations and individuals will be more limited in nature. Lastly, we expect less risk of disruption from any new regulations. Industries like technology, health care, financial, and energy may be less encumbered than they otherwise would have been under a “blue wave” scenario.

Coronavirus

Unfortunately, the trend of rising Covid-19 infections around the world continued this week. Globally, we have reached 500,000 new cases and 6,500 new deaths daily.

Despite the actions undertaken by several European countries, the upward trend in infections has yet to significantly change. Meanwhile, fatalities linked to the virus have continued to climb. Although some of the broader nationwide lockdowns have only been in place for close to a week, governments are hopeful the actions taken will eventually curb these trends. Time will tell but it has been a formula that has proven successful in the past. In the U.S., the country reported a record of more than 100,000 new daily infections this week. Hospitals across southern and Midwestern states such as Oklahoma, Missouri, North Dakota, and Idaho are showing signs of strain, suggesting more restrictive measures may be needed.

In Canada, the 7-day moving average of new daily cases is over 3200 versus the 2750 from the previous week. Outside of the northern territories and the East Coast, all provinces saw an increase. Alberta did see a slowing in its rate of new case growth, while Quebec and Ontario’s changes were relatively modest. Elsewhere, Manitoba continues to lead with the fastest increase in its new daily infection rate, while Saskatchewan and British Columbia also saw alarming increases relative to other provinces.

In closing, I’ll circle back to the issue of uncertainty. Despite the drama that unfolded over the past week, investors now have some more clarity with respect to the Congressional make-up of the next U.S. government. And, as mentioned, we expect less extensive action with respect to taxes and regulation. This should help provide a supportive backdrop for consumers and businesses. We expect investors to gradually turn their attention back to the economy and the earnings recovery that remain key to the outlook for markets in the year ahead.

As we look out, it’s important to remain positive, remain optimistic and understand where you are heading. It’s a journey for us all to enjoy and it’s important to always maintain perspective

Enjoy the week, be well & enjoy the moments

“When ego is lost, limit is lost. You become infinite, kind, beautiful.” Harbhajan Singh Yogi