Volatility was higher this week as global Covid cases and uncertainty on U.S. stimulus negotiations weighed on investor sentiment. Investors were treated to a more orderly debate between Donald Trump and Joe Biden. The takeaway appears to be that both candidates did well enough, and it may have little impact on the election which is just over a week away.
Coronavirus update
It was a record breaking week for Canada as it reported nearly 2800 new daily infections. However, the pace at which the virus is spreading has shown signs of moderating.
The United States continues to see its situation worsen as well with new daily infections that have surpassed 60,000. As with Canada, this recent wave is fairly broad-based and not specific to any one region.
Business sentiment weak but improving
The third quarter earnings season is well underway and while still early, the trend has been positive thus far.
This “weak but improving” story was echoed by results from the Bank of Canada’s recent quarterly “Business Outlook Survey”, which summarizes the outlooks of business leaders from about a hundred firms across the country. This survey was completed between late August and September. In a nutshell, business sentiment remains negative but has trended positively across all regions in Canada.
Interestingly, management teams from a number of U.S. banks indicated that the period of building loan loss reserves in anticipation of future credit losses may now be behind them. That’s not to say the challenges facing businesses and households have diminished. Rather, it suggests that banks feel they have adequately prepared for future losses given the billions of dollars they have set aside on their balance sheets. Nevertheless, some of the commentary from U.S. banks does illustrate that the outlook is improving.
I am encouraged by some of the anecdotal evidence and commentary from businesses across North America that suggest a weak but improving business climate. My hope is that the combination of time, government aid, and innovation on the health care front can continue to nurture a backdrop that eventually helps lead to a broader and more sustainable recovery for businesses and households in the year ahead.
Enjoy the weather!
Tim