It’s been a tale of two stories the past few weeks. On the one hand, concerning coronavirus trends across key hotspots and new localized outbreaks in some countries. On the other hand, resilient markets which appear to believe that, for now, the worst of the economic damage may be behind us, elevated infections don’t pose as severe a health care challenge as they did months ago, and that solutions in the form of vaccines may be on the horizon. This week also marked the kickoff to the second quarter earnings season. We share some of our key thoughts and takeaways.

This week, the number of new daily cases in the U.S. averaged well over 60,000. For context, this figure was below 30,000 about a month ago. Trends remain most concerning in large states such as Florida, Texas, and California. The latter moved to shut down most indoor operations of establishments such as restaurants, bars, and gyms. This adds to a growing list of states that have halted their reopening plans.

There was encouraging news this week on the vaccine front. The New England Journal of Medicine published detailed results of a U.S.-based Phase I vaccine trial. To be clear, early positive results from the trial were released in May, and understandably fueled a positive market response back then. The paper this week confirmed the vaccine demonstrated the ability to safely help all 45 trial participants produce antibodies to protect against the virus. It is expected to move to a Phase 3 trial by the end of this month. There is more to come next week as a U.K.-based medical journal is expected to provide positive results of a Phase I trial of another vaccine. This serves as a reminder that we may one day be able to better protect people and potentially even eradicate the virus.

In Canada, trends remain much more comforting. Provincial and local governments have moved forward with reopening plans. One of the major dilemmas now facing government officials is on the school front. Some provinces have already committed to a full return in the fall, at least for elementary schools, while others are exploring options that include a hybrid approach of in-class, staggered, part-time, and virtual class sessions. These are difficult and complex decisions that have implications for millions of families, parents, and youth across the country. Moreover, they may have major repercussions on productivity, the labour force, and the overall trajectory of our country’s economy in the second half of this year and beyond. Our economy can use all the help it can get. This week, the new Bank of Canada Governor indicated it may take two years to reach the level of economic output we saw in 2019.

This week marked the start of a busy period for company earnings releases, with U.S. banks reporting their quarterly results. The second quarter period encapsulates the month of April, when lockdowns were in full force, through until the end of June, when restrictions started to ease and activity recover. Our primary takeaway is the banks continue to expect credit losses to rise in the future, particularly once some of the government aid programs expire. In response, most banks added meaningfully to the large reserves they already set aside last quarter.

We look forward to hearing from more companies and management teams over the next month, though we suspect few will have the clarity investors are seeking given that the paths of the virus and economy remain uncertain.

Four months into the COVID pandemic and some Americans have hit lockdown fatigue, if traffic data is any indication. How will mobility patterns shift as U.S. re-openings continue to stop and start? And how will this erratic demand affect oil prices? On the latest “10-Minute Take” podcast, Michael Tran, RBC Capital Markets’ Global Energy Strategist, shares his insights from real-time traffic data during the pandemic.

 

This week’s tip focuses on at home entertainment. For month’s we have been cooped up in our homes and even with the provinces starting to progress through the phases of re-opening, there is still a lack of entertainment to keep us busy! Below we have listed a few online free resources that can keep you entertained at home.

First Up with RBCxMusic: To support the Canadian music community during these challenging times, RBC is excited to introduce First Up with RBCxMusic, a series of 30-minute recorded performances from emerging artists across Canada.

Romeo & Juliet - The Calgary Theatre: To keep a 32-year Calgary summer tradition alive, Theatre Calgary has re-imagined this experience as an approximately 50-minute long virtual show. RBC Foundation is the proud supporter of the Emerging Artist Project.

Ripley’s Aquarium at home: Sit back and watch the sharks swim by at Ripley’s Aquarium of Canada or waddle about with Ripley’s Penguins in Myrtle Beach and Gatlinburg.

Have a good weekend and enjoy the weather!