Expectations for the Back-Half of 2021 Continue to Build

Apr 01, 2021 | Nick Scholte


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With these, a shift from a modest overweight in equities to a significant overweight positioning has been initiated. The rebalance will be completed Monday.

To my clients:

It was an up week for North American stock markets with the Canadian TSX finishing up 1.3%; the U.S. Dow Jones Index up 0.3%; and the U.S. S&P 500 up 1.1%.

Covid cases are rising. It is likely the case that the natural ebb and flow in human behaviour that I’ve mentioned occasionally the past many weeks has now shifted too far in favour of relaxing precautions given the successful rollout of vaccinations in the U.S. (sadly, the rollout has been less successful so far in Canada leading to “circuit breakers” being imposed this week here in BC and a province-wide “emergency brake” announced today in Ontario). Canada’s current surge notwithstanding, sentiment for the back-half of 2021 is clearly buoyant, and I too look forward to a more normalized world. But it’s not here yet. Yet the optimism for the future is swaying actions in the present. And it’s premature. That said, unless a super-virulent or vaccine-immune variant emerges, it’s very difficult to envision a surge to the levels seen over the winter.

And I believe it would truly take a near cataclysmic setback on the covid front to derail the economic expansion taking hold. To wit, look no further than ISM Manufacturing Index data released today. At 64.7, this important indicator (one of the “Big 3” I always track) came in at the highest level since 1983! Although it’s a holiday tomorrow, the U.S. will still be releasing its monthly Employment Report, and expectations are high. The consensus expectation of economists is for 647,000 jobs to have been added in March vs. 379,000 reported in February. Some high-end expectations of individual economists are in the range of 1 million. These are extremely strong numbers. Add to this the 8-year $2 trillion infrastructure package proposed in the U.S. and the economic momentum can only build. Higher corporate tax rates in the U.S. are not likely to offset the surge in earnings anticipated (expected by some at 40%+).

In light of the economic outlook and efficacy of vaccines shown to date, I have begun the process of rebalancing client portfolios with the objective of moving from a slight overweight to a significant overweight position in equities/stocks in relation to the long-term target set in each client’s own personalized Investment policy Statement. The rebalance will be finished on Monday.

That’s it for this week. All the best and stay safe,

Nick

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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