A few topics our newsletter touches on this week:
- Our Thoughts: U.S. Election “Insert Winner Here”
- Interesting Listening: Market Volatility, Implications of US Election
- Interesting Reading: Global Insight Monthly, One-Minute Market Update
- Distraction Content: Election Distractor & Halloween Fund
Our Thoughts: U.S. Election “Insert Winner Here”
October saw markets react negatively to the uncertainty on several fronts. Volatility jumped and global equities sold off based on concerns of a second wave of COVID-19 that has been spreading faster than expected and the U.S. elections, specifically the implications of a possible “Blue Wave”. The first week of November has seen a strong rally in equities, likely buoyed by the prospect of a split congress (Biden presidency + Republican controlled Senate), more on that below.
By the numbers: October saw market weakness on both sides of the border. The TSX fell 3.1% while the S&P 500 fell 2.7% (also -2.7% in Canadian dollars). Europe, Australia & Far East (EAFE) was down 4.1%. The Canadian bond universe fell 0.8% with its US counterpart being down 0.42% (USD).
What we are watching: Well the US election of course. Markets have rebounded favourably since Monday, at least in part a reaction to a likely Biden win with a Republican-controlled Senate – a win in the eyes of markets from a tax policy perspective. Tech and Pharma giants also bouncing on the prospect of no “Blue wave”, which likely scraps plans for tighter regulation in those sectors. There will still be a wait for a final result, although Biden seems to have many more remaining paths to 270 left to him, with Dem-leaning mail-in ballots predominantly left to be counted in the “toss-up” states. As of this morning, we expect more clarity on the presidential election in the coming days as states complete the counting of ballots. Although recounts and legal challenges could drag this out further.
On the congressional side, the Democratic Party has fallen short of expectations. They appear set to keep their majority in the House of Representatives despite losing a few seats. Meanwhile, in the Senate, the path for them to win a majority has narrowed significantly as they were unable to win states that were considered toss-ups. There is still a slim chance for Democrats with likely two “runoff” elections in January in the state of Georgia. At present count the Republican Party’s success in the Senate race has reduced the odds of a “blue wave” scenario.
While all eyes have been trained on the US elections, 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. Meanwhile the UK, France & Germany have re-entered various forms of lockdown, while Ford’s government here in Ontario seems poised to loosen restrictions across the Peel/Toronto/Ottawa hotspots.
In closing, we 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.
Reminder: Tax-loss Selling Season
Year-end represents a very important time for tax planning opportunities. Tax-loss selling is a method of selling investment assets that have decreased in value to create a loss, which can then be used to offset capital gains in other areas. We review the gains position of all client portfolios before the end of the year and will be in touch if we identify any opportunities.
However, If you have realized substantial gains in 2020 outside of your investment portfolio that we might not be aware of (e.g. sale of a cottage) please notify us so that we can help you review any tax-loss selling opportunities.
Interesting Listening
The 10 Minute Take – RBC Podcast Series
The U.S. Has Voted – Now What? ( RBC Audio Commentary – about 13 min)
- Janet Engels, Head of the Portfolio Advisory Group – U.S., and Tylar Lunke, Senior Manager of Managed Portfolio Strategies at RBC Wealth Management, talk about how the markets have handled this wild week and what they’re watching as the election outcome remains in a bit of no-man’s land. They also discuss the implications of what appears to be a status quo Congress, and where investors should focus their attention.
Interesting Reading
- Global Insight Monthly Oct 2020 edition is out, find the link on our website here. You can also view the weekly/daily editions on the same page.
- Would Americans be better off if they learned a few election tips from Canada? Global News piece here
- 2020 Financial Planning Strategies for Seniors – an RBC WM Navigator article summarizing key strategies will be posted to our website in the next week.
Distraction Content – Election Relief & Halloween fun
Halloween may be over, but it’s not too late to get a fix on some spooky film/tv content, HuffPost Canada summarized a lot of the best family-friendly options if you want to check them out here.
New York Times created an “Election Distractor” interactive tool on their website, it generates soothing/calming content to distract people who are stressed out following the US election process – even us Canadians can benefit given the wall-to-wall coverage.
Our team is here for you
We are happy to run our next meeting with you by video conference (WebEx Meetings) rather than by phone if you so choose. We also continue to be available if you have friends or family who might be seeking a consult on their portfolio, wealth or estate planning goals.
Regards,
Mark, Peter, Sarah, Corinne & Andrea
Gallivan Wealth Management Team