The fall outlook

Sep 22, 2020 | Robert Thomson


Share

Looking forward the next few months, we are starting to see more positive signs. The data coming out is signaling that the economy has a foothold.

Looking forward the next few months, we are starting to see more positive signs. The data coming out is signaling that the economy has a foothold. Yes there may be bumpy patches ahead, and certain segments of the market will be in difficulty, but most businesses have had time to adapt and are beginning to move forward.

 

Taking this into account and thinking about the investing landscape, we’re entering a short term period where there could be a pullback, and/or a market surge. Though there could also be a surprise event, the potential pull-back could be caused by three main events:

  • What we are seeing now - Tech stock sell-off
    • Tech stocks have seen incredible growth, and we're seen a sell-off to solidify gains by investors.  This is cascading through the rest of the market and causing a broader sell off (though less severe in other sectors) as investors are starting to look at fair valuations of companies. 
    • We feel this may last a few weeks, however for the medium or long term, we aren't concerned about these companies.  These companies are ones that have been thriving in the Covid environment, and will continue to do so as they are at the forefront in the changes in consumer behaviour we are seeing.
  • US Election, and any sort of uncertainty in relation to it
    • If the republicans lose but refuses to concede, this would have a negative impact on the markets, however we don’t see that as long-lasting at this point as his support in government would likely falter, and market impact would be short in length.
  • Second Wave of Covid.
    • Many investors are already anticipating this, and many businesses have had time to adapt, so this event would probably be less impactful on the market than one would expect, and not come anywhere close to the lows we saw in March.
    • Therapeutic treatments have are being used now and the severity of the virus is less than it was in the spring.

The potential for a market surge is based on some other potential events

  • US Election (again, a positive as well as a negative)
    • Any outcome, Dem or Rep, will cause a rise in the market as there would be removal of uncertainty
  • Vaccine. This is the trump card (no pun intended)
    • We are nearing a time when many pharma companies are coming close to a vaccine. If one is announced, or promising trial results are released, the market will rally. We do expect developments in this are over the next few months.  A vaccine will also give the market an idea of an end date to the restrictions… and it will be even more inclined to look past any current troubles and stay elevated.