Re-opening is Well Underway; it Will be Important to Monitor New Covid 19 Case Counts Over the Next Two Weeks

May 22, 2020 | Nick Scholte


Will new case counts materially increase? Regardless of the answer, how will consumers re-engage in the newly opened jurisdictions? Also of significance this week are building tensions with China.

To my clients:

It was an up week for North American stock markets with the Canadian TSX finishing up 1.9%; the U.S. Dow Jones Index finishing up 3.3%; and the U.S. S&P 500 finishing up 3.2%.

Re-opening of economies worldwide continues, at least in many early hit countries in Asia, Europe, and North America. Other regions such as the Middle East and Latin America are emerging hot zones. Regarding the re-opening economies, if there is to be an uptick in Covid19 cases as a result, we should be starting to see it beginning right about now and into the immediate two weeks ahead. There are tentative signs that the U.S. may be in the early stages of an uptick in cases, although I caution that this may simply owe to a concurrent increase in testing. In other words, if you test more sick people, you are going to discover more sick people. So higher testing leading to higher case counts doesn’t necessarily indicate a higher infection rate in the general population. One thing that seems clear though – the U.S., as a country, is not experiencing any material decline in daily new cases. It continues to persist at about 25,000 per day. Owing to the developing hot zones in Latin America and the Middle East, the world as a whole continues to see an upward trend in new daily cases (now over 100,000 per day).

I’m not going to belabor the Covid19 discussion any more than this. The next two weeks will be very revealing. Hopefully social distancing and related safety measures suppress any resurgence in cases.

This week, as with last, I’ll reiterate growing U.S. tensions with China. The U.S. Senate unanimously passed a motion requiring foreign issuers trading their shares on U.S. stock markets to adhere to certain accounting standards and to disclose – as a condition of continued listing – if the company is owned or controlled by a foreign government. While technically applying to all foreign listed companies, this seems a clear shot at China and, in particular, Huwaei. For its part, China seems to be taking advantage of the pandemic crisis and the diverted focus of foreign governments to once again try to impose stricter national security laws on Hong Kong. It further bears mentioning that China has officially withheld its usual annual economic growth target owing to uncertainties over the covid19 pandemic.

Portfolios remain underweight equities. While a full “retest” of the March 23 lows may no longer be likely, particularly in light of the massive fiscal and monetary response from governments and central banks worldwide, there is ample uncertainty related to the Covid19 path over the next two weeks (and beyond), how consumers will re-engage with opening economies, and the growing geopolitical tensions with China to justify the underweight stance. I’ll continue to await a better risk/reward entry point to bring portfolios back to more neutral levels.

That’s it for this week. All the best and continued safety,


Nick Scholte, CIM, FCSI

Vice-President & Portfolio Manager

Scholte Wealth Management
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