Good afternoon,
As I write this, the Dow is up 300 points. However, weakness in global markets continued to persist this past week. A laundry list of items were to blame, including a number of U.S. monetary policymakers who pleaded for Congress to pass more fiscal stimulus, concerns over the potential of a contested U.S. election, a noticeable slowing in European services activity, covid-19 case trends and the potential for more government restrictions.
Coronavirus update
The rate of new infections in Canada continued to accelerate over the past week with the country seeing its 7 day moving average surpass 1100 versus 800 the previous week. From a provincial perspective, Quebec and Ontario remain the hot spots, with the fastest growth rates.
Elsewhere, developments have been mixed. Europe continues to grapple with its second wave. The United States has seen a stalling in its declining trend, though it appears to have flat lined as opposed to move higher.
The implications of our government’s plan
The Liberal government delivered its throne speech this past week. Given the emergence of a second wave of the coronavirus in Canada, it was not necessarily surprising to see a heavy focus on the various programs put in place to continue to support the unemployed and businesses that are being impacted by the pandemic in order to buy more time for the economic recovery. Interestingly, there was a change to one particular program, which may be enough to secure the support from the NDP party. If the Liberals want to survive a parliamentary confidence vote in the days to come, they will need the NDP given the Conservatives and Bloc Québécois have suggested they are not likely to be supportive.
There will be concerns about the cost of these programs as the fiscal deficit was already expected to be the largest this year since the Second World War. Moreover, the government will be funding this spending with increasing amounts of debt. Keep in mind, this debt is being funded at historically low interest rates.
We are likely to turn our attention from Canada to the U.S. and its presidential and congressional elections. The first of three presidential debates takes place soon (September 29th) and the noise could last longer than it otherwise would as there is some risk of a contested outcome.
Enjoy your weekend.
Tim