To my clients:
It was a down week for North American stock markets with the Canadian TSX falling 4.4%; the U.S. Dow Jones Index falling 6.5%; and the U.S. S&P 500 falling 5.6%.
A short point-form update this week to maintain a focus on some key themes:
1) The long anticipated autumn wave is unquestionably here. Globally, cases are now topping 500,000 per day. In the U.S. the daily case count set yet another new record topping 90,000… 100,000 cases per day in the U.S. is imminent.
2) Stock markets had their worst week since March.
3) Owing to a variety of factors such as better treatments; better protection of the elderly and vulnerable; a younger demographic getting infected etc., death rates are not rising proportionate to the rate seen early in the pandemic. But, owing to the lag between infection and the sad ultimate outcome for the unlucky, death rates WILL rise in the weeks ahead.
4) Taking advantage of the market weakness, and as long foreshadowed, a small equity addition was made this week (in the credit card company Visa). Some further incremental additions were made for new clients welcomed aboard the past 6 months so as to continue to align these accounts with the positioning of my more longstanding clientele (for the affected newer clients, allocations may not appear in accounts until next Monday).
5) Despite the addition(s) made in #4 above, and as I communicated to a client this week, this is no time to be a hero. Further additions will continue to be incremental. At most, I see bringing client equity positioning to perhaps slightly greater than neutral over the next 1 to 4 weeks. But a full overweight position is not envisioned.
6) Colder weather has arrived. With it, the holiday season. U.S. Thanksgiving and the associated gatherings does not bode well for case trends (more locally here in BC, Dr. Bonnie Henry tied some of the recent provincial surge to our own Canadian Thanksgiving). Globally, Christmas and New Year holidays are also problematic.
7) Lastly, I failed to include in last week’s comment what might be my biggest concern about the upcoming U.S. election – the possibility (probability?) of a contested outcome. Uncertainty engendered by such an outcome is not likely to be well tolerated by the markets.
That’s it for this week. All the best, and stay safe,
Nick Scholte, CIM, FCSI
Vice-President & Portfolio Manager
Scholte Wealth Management
RBC Dominion Securities Inc. │ Tel: 604.257.7569 │ Fax: 604.235.9950
3200-1055 West Georgia │ Vancouver, BC │ V6E 3P3
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