To my clients:
It was a mixed week for North American stock markets with the Canadian TSX finishing down 0.4%; the U.S. Dow Jones Index finishing up 0.6%; and the U.S. S&P 500 finishing up 1.9%.
Since quarterly review packages were sent to discretionary clients this week, I’ll limit this week’s update to just a couple of brief topics…
Regarding the new Covid-19 variants, the news skewed toward the positive. Experts are growing increasingly optimistic that the current crop of vaccines will largely protect against infection from the new variants and, where they don’t, that the vaccines will protect against severe outcomes. Dr. Fauci said as much in a news briefing yesterday, and an online article I read on cnn.com the day prior said the same (link to article here). Both sources said that, ideally, there should be tweaks to the existing vaccines to provide even better protection against the new variants but that, as constituted, the protection is sufficient to advance the personal security and confidence of individuals, as well as the societal goal of herd immunity. That’s the good news. In recent hours however, U.K. Prime Minister Boris Johnson held a press briefing where he indicated that in addition to being more contagious, there are emerging signs are that the U.K variant also leads to more severe outcomes. While this is not good news, I emphasize that the analysis is still in its early stages. To my mind, the positive news about vaccine efficacy outweighs the possibly more severe strain which has emerged in the U.K.
I should also add that the infection rate in both the U.S. and Canada is beginning to decline very substantially. We are now far enough removed from the Christmas season to perhaps trust that this decline is real and that any holiday distortions have now been worked through the data. I suspect the high levels of infection that existed the prior two months may have created a mini-herd immunity in that subset of the population which is more prone to infection for whatever reason (be it disregard for distancing protocols and mask wearing, or simply working in an industry that heightens exposure risks). Owing to the declining infection rates, we should start to see a drop in reported deaths two to three weeks down the road.
Lastly, a comment about this week’s change in U.S. Presidential administrations. In watching the press briefings and interviews, the change in tenor was very welcome to me. While I previously had reservations about Joe Biden’s leadership “aura” (I must admit I found him a bit boring during the Democratic debates about a year ago), I now believe his calm temperament might be just what the U.S. needs right now. I’m legitimately hopeful about the direction he may lead the U.S.
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
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