Hello,

 

Markets made little headway over the past week, finishing roughly where they started.

 

Coronavirus update

Seemingly, there was a reversal of fortunes this week with respect to global coronavirus trends. The U.S. experienced some stability in contrast to the rest of the world which has been faced with a resurgence.

 

Positively, the U.S. witnessed stable to modestly lower rates of new infections in some of its most populated states, including California. Notably, some states across the Midwest appear to be experiencing rising cases, though the levels are not alarming at this point. Overall, the average number of new daily cases across the country remains elevated at well over 60,000, but this level has not increased for the second week in a row. Unfortunately, the number of fatalities has been rising. While tragic, this is not surprising as deaths lag new infections. Encouragingly, the mortality rate remains well below the levels witnessed in the country months ago, despite infections being meaningfully higher.

 

Company earnings and economic wobbles

The second quarter earnings season is roughly half way complete. Thus far, results from companies in Canada, the U.S., and Europe have been in-line to slightly better than expectations on average, helping reassure investors to some extent. The large and growing technology sector has garnered a lot of attention and focus, and deservedly so, as results confirmed what many investors already understood – these companies’ business models are well positioned to deal with an environment that remains far from normal. Yet, revenue and profits from companies across a range of industries also followed the positive trend of being as good as or better than investor expectations.

 

Despite the positive narrative, significant challenges persist. Many management teams suggested visibility remains limited and difficulties still lie ahead once government aid programs expire. Furthermore, many entrepreneurs with small and medium sized businesses are struggling with restrictions imposed by governments and overall weak demand. Additionally, many don’t get to benefit from the kind of financial flexibility and workforce agility of some public companies. Furthermore, there continue to be signs that suggest the positive economic momentum is wobbling, particularly in the U.S. The number of people filing weekly jobless claims, which had been improving (i.e. declining) for many weeks, has stalled and begun to reverse course over the past two weeks.

 

Pressure continues to mount on the U.S. government to come up with another round of stimulus. But finding some compromise is clearly proving to be more challenging than expected. Nevertheless, I continue to believe some resolution will surface in the not too distant future.

 

Have a great weekend.

 

Tim