To my clients:
It was a mixed week for North American stock markets with the Canadian TSX finishing up 0.5%; the U.S. Dow Jones Index down 0.4%; and the U.S. S&P 500 down 0.4%.
The Delta variant, and its implications for the economic recovery, is garnering increased attention as cases ramp up in many locales around the world – including the U.S. and Canada. This has led many to worry about the sustainability of the economic recovery. While a continued ramp-up in cases may potentially slow the recovery it will not, in my view, derail it. To support this view, I will cite comments made in my quarterly letter to discretionary clients from earlier this month:
- There is little appetite among populations or governments to return to full lock-down status
- Even if partial lock-downs re-emerge, economies have learned to adequately function in the presence of such restrictions
- Severe disease amongst the vaccinated is unlikely thereby allowing near full economic participation amongst this group without fear of significant health consequences
- While admittedly a generalization, it’s notable that unvaccinated populations are largely conservative and/or libertarian in political outlook. These groups have tended to more fully participate in the economy in spite of potential health consequences.
- The vaccinated percentage of the population will continue to increase. Owing to the possibility of selective restrictions on the unvaccinated, this is likely to be true even amongst the aforementioned vaccine-hesitant groups (should they wish, perhaps, to travel internationally; or visit a theme park; or eat a restaurant etc.)*
*I should note that this last point is now happening. Some of the least-vaccinated U.S. states seeing the highest share of new cases are now also reporting the highest daily new vaccination rates.
Also, former Food and Drug Administration Commissioner, Dr. Scott Gottlieb, whom I have cited in these weekly updates on occasion in the past, and who has proven to be a very accurate prognosticator of future covid trends (driven by his highly data driven scientific approach), has suggested that the Delta surge occurring in the U.S. is likely to begin receding in the next couple of weeks. He cites a number of reasons for this outlook, foremost amongst these is the recent Delta surge in the U.K. where new cases are now in dramatic decline.
Last note: I have also previously cited the website of a client which tracks covid cases around the world. Some month ago, this client added vaccine distribution data to the site. From this website and scrolling down the list of all countries worldwide, it’s interesting to see how well Canada has done in its vaccine distribution. While our country was a notable laggard in the early days, we have now significantly surpassed the U.S. in distribution. In fact, our country is amongst the most widely vaccinated populations in the world, with 57% of the population fully vaccinated and 71% of the population having received one dose. Keep in mind that these percentages are based on Canada’s total population, including children under 12 who are not currently eligible to be vaccinated - the point being that the vaccination rate amongst those eligible to receive a vaccine is even higher. I don’t think it’s a stretch to suggest that our less polarized political landscape vis-à-vis the U.S. is the likely main contributor to this ongoing success.
Bottom-line: absent the emergence of a vaccine-immune variant, portfolio positioning is unlikely to be adjusted as a result of covid.
That’s it for this week. Have a great long-weekend. All the best,
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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