Recently, Jim Allworth, a portfolio strategist with RBC Dominion Securities and Mark Bayko, head of the RBC Portfolio Advisory Group, discussed their thoughts on the most recent economic developments and their outlook on the economy going forward.

 

Jim Allworth has spent over 50 years in the investment business, both as a research analyst and portfolio strategist. Jim is also Co-Chair of the Global Portfolio Advisory Committee (GPAC), which provides strategic analysis of financial markets to establish asset allocation mixes for clients worldwide.

 

To listen to the full audio broadcast, follow this [Link].

 

Jim’s presentation brings to light many imports aspects surrounding the events of Covdi-19. These highlights include:

 

How uncertainty arrived:

From January to February, the crisis was something that North America did not feel it had to take too seriously. The impact was greater felt on the Chinese economy. Concerns surrounded the disruption in supply chains.

 

By March, fear had taken over:

First it reflected concerns on health, then it became a concern around the economy. Now, uncertainties surround how to restart the economy and what impact it will have on businesses.

 

Looking back at past experiences:

As research from previous wars, pandemics, etc. shows, when events such as this happen, once they are done, they are done (and there is no long-term permanent impact). The economy is driven by exactly two things at all times—the growth in populations and the growth in “prosperity.”

 

After each event, businesses are valued once again appropriately:

These events are not permanent and do not cast a permanent shadow on the economy. Rather, they cast a shadow on people’s psychology (and investing psychology).

 

Going forward:

Focus will not be on this year’s earnings, but next year’s earnings/prospects and into the future.

 

Their thoughts on oil and negative oil prices:

Energy will be a sector that will continue to be challenged, as it has been for a while now in North America. Facilities in North America have reached full capacity and oil has no place to go (inventory problems). Consumption has dropped dramatically because of the effects of Covid-19 while we had already been producing too much oil, and continued to do so throughout. Oil however, should begin to rise in the following year (potential to head back towards the $30 range).

 

The information we can process from this:

We will have a better sense of which companies will come out on top and which are vulnerable.

 

The shift for businesses:

Companies have adapted to the working from home/virtual meeting changes. Because of this, businesses will be more incorporated with technologies and have come to realize their value/necessity. However, for most businesses, face-to-face meetings won’t go away, but they will be modified for some industries.

 

The question surrounding future businesses:

Many businesses now understand the importance of incorporating online business practices. Those who had already incorporated technology or who had done so at the beginning of the crisis, will be the ones to succeed.

 

Their conclusion:

Online practices and the incorporation of technology into businesses practices will widen the gap between businesses who are successful, and those who aren’t.