How COVID will transform the economy and disrupt every business – Update from Rhonda Hymers & Hymers Wealth Management Group

May 23, 2020 | Rhonda Hymers


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COVID-19, the Economy and the Way Forward

COVID-19, the Economy and the Way Forward

The economic impact from this pandemic cannot be understated. With millions unemployed, shops closed and travel restricted, it is to nobody’s surprise that a technical recession (defined as two consecutive quarters of negative GDP growth) is expected to occur this year. Although governments have started to loosen social distancing measures, allowing certain businesses to open and group gatherings to take place, it may be some time before the economy is operating at full capacity again.

While it may seem distressing to think about investing during a time like this, it is important to note that not all sectors of the economy are feeling the same level of pain. In fact, we are seeing increased demand and accelerated adoption in several areas. For example, e-commerce, wireless data, and medical testing equipment businesses have seen increased demand. Outside of these growth areas, companies are finding new ways to adapt to this new normal; adopting new processes and finding more efficient ways to get things done. In our office, as an example, we have adopted the use of videoconferencing technology and e-signatures, as well as eliminated several administrative processes that we now realize were redundant. These efficiencies will carry us forward after this pandemic is over as we emerge leaner, faster and stronger.

While the outlook in the near term appears uncertain, we must never discount our ability to learn, adapt and grow through the toughest of times.

Spotlight on the Canadian banks

The Canadian banks are set to report second quarter results over the next week. This is a particularly important update. First, the banks tend to be a good gage of the health of our overall economy. The results for the period of February through April, and management commentary on the outlook, will offer clues about the extent and trajectory of economic damage in this country. Secondly, the banks represent a meaningful portion of most Canadian investor portfolios. If the U.S. banks, who reported their own results weeks ago, are any indication, the results are not likely to be very good. But, that may already be expected by the market to some degree. Bank stocks trade at valuations that were last seen during the great financial crisis of more than a decade ago. This signals to us that investors already expect the companies to face higher risks in the form of future loan defaults and customer bankruptcies. While these loan issues may not arise immediately, the banks have to effectively budget for them in advance and it is widely expected they will begin to do so with the release of their results. We take some comfort in the strong capital positions they have accumulated in recent years that can help provide some cushion against the credit losses that may come. While earnings may be volatile and balance sheets will be tested, we believe the banks will continue to offer sustainable dividend income for investors.

There has been enough to worry about in recent months. We view China’s announcement of new national laws being imposed on Hong Kong as being yet another potential source of stress in the relationship between China and the U.S. It is a risk we will continue to watch closely.

In this week’s blog we have included the following articles and videos that I believe you will find of interest.

As always, if you have any questions please feel free to reach out.

Kind Regards,

Rhonda Hymers

GLOBAL INSIGHT

MAY 21, 2020

Global Insight Weekly - May 21

Style guide – Growth vs. value, it’s an age-old debate. Given the COVID-19 dynamics of today’s equity market, which style is more apropos? While some tempting cases can be made for value, we think it’s too soon to go big into value stocks at the expense of growth stocks. 


 

8 Ways COVID Will Transform the Economy and Disrupt Every Business

If there is one lesson from the pandemic of 2020, it may be this: We are biological beings in a digital age. No matter how much technology we have, we’ve discovered we cannot escape nature’s grip. And yet, no matter how humbling this crisis has been, it also should remind us that even a massive jolt to the planet cannot change the trajectory of the Fourth Industrial Revolution. If anything, we’re emerging from this crisis with an even greater desire to harness smart technologies, new forms of intelligence and vast pools of data to transform pretty much everything we do. COVID did not crush the future. It merely brought it forward. 


What’s ahead for the loonie

Featuring George Davis, RBC Capital Markets’ Chief Technical Strategist in Foreign Exchange Trading

The loonie has defied expectations during the recent rout in oil markets, hitching its wagon to another driver. Move over crude, hello equities. But the road ahead still has bumps, with implications for USD/CAD foreign exchange. How will extended travel restrictions affect cross-border investments? And what could snowbird investors expect from the U.S. Fed? George Davis, Chief Technical Strategist in Foreign Exchange Trading at RBC Capital Markets, joins us with the outlook on the Canadian dollar.

The 10-Minute Take podcast provides insights from RBC economists and market experts on events unfolding around the globe.


 Moving forward with COVID-19

In this week’s video, Eric Lascelles, Chief Economist of RBC Global Asset Management, shares his insights into economic developments related to COVID-19. Lascelles notes that he is seeing more positives than negatives lately in the data. There have been improvements related to infection rates, oil prices, and the stock market – but we are not out of the woods yet. Click here for video presentation


"As sure as the spring will follow the winter, prosperity and economic growth will follow recession." ~ Bo Bennett