To my clients:
It was an up week for North American stock markets with the Canadian TSX finishing up 0.6%; the U.S. Dow Jones Index up 1.2%; and the U.S. S&P 500 up 1.4%.
On economics, recall that last week ISM Manufacturing came in at a 4 decade high; ISM Services came in at an all-time high since the introduction of the metric in 1997; the U.S. monthly employment report came in at 916,000 which, covid-times notwithstanding, would have been a near 40-year high also. Then this week we saw: retail sales surge 9.8% month-over-month; weekly jobless claims come in vastly better than expectations spiking down to a pandemic low 576,000; and the Philadelphia and New York regional manufacturing surveys both come in at the high-end of their all-time historical ranges. Overall, economic activity in the U.S. is exceedingly strong and poised for further improvement as epicenter industries such as travel, theme parks, and restaurants (among others) are set to more fully participate in the U.S. re-opening.
Given the much slower vaccine rollout here in Canada, it’s likely the case that the recovery blueprint being laid in the U.S. will be a few months delayed in developing here at home. But it is hard to fathom that a similar path doesn’t lie ahead for us also. And our own stock market reflects this expectation, having now decisively broken out of the largely sideways trend in place since the 2008 financial crisis.
As the Chair of Dominion Securities’ Strategy Committee, Jim Allworth, is wont to say, equities (i.e. stocks) should be given the benefit of the doubt in nearly all economic environments other than recession – specifically, a U.S. recession. Absent the arrival of a vaccine-immune covid-variant, a U.S. recession is absolutely NOT looming in the foreseeable future. So, indeed, equities should be given the benefit of the doubt and recent rebalancing has positioned client portfolios in a significant overweight equities position.
In future weekly updates, I’ll spend some time revisiting some of the economic markers we look for in assessing the prospects of recession. That said, and the preceding caveat of a vaccine-immune covid variant notwithstanding, I reiterate that recession is NOT a 2021 story.
That’s it for this week. All the best as you continue to 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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