Category: Michel’s point of view

Dear friends,

I hope you are your family are continuing to stay well. I am writing to update you on some of the key economic, market and pandemic-related developments for the week.

Macroeconomic and market developments

• The number of confirmed COVID-19 cases worldwide surpassed 15 million. The U.S. continued to struggle to contain the spread of the virus, with California taking over from New York as the state with the highest number of infections. Other global hotspots include Brazil and India. Restrictions on gathering and business activity continued to be relaxed in many regions of Canada based on low infection rates.
• North American equity markets moved marginally higher as companies reported mixed earnings results and various coronavirus vaccine trials in the U.K., Germany and Canada reported continued progress, but fell later in the week as confidence in the economic recovery stalled.
• The U.S. government said it was considering a program to provide unemployment assistance for workers for the rest of the year on a reduced basis. In Canada, the government extended wage subsidies for employers still struggling with the business impacts of the pandemic to the end of December.
• The annual inflation rate in Canada was 0.7% in June, exceeding market expectations.

What does this mean for my investments?

The markets’ rebound from the depths of the mid-March pandemic-driven drawdown reflects optimism that businesses will continue to recover and that as a global society we will find ways to contain the spread of COVID-19. At the same time, government and fiscal support measures for households and businesses continue to provide a strong tailwind for many parts of the market, particularly equity and corporate bond markets. Nevertheless, economic activity remains below pre-pandemic levels and significant adjustments are still needed for many businesses to recover, presenting significant risks to the outlook.

Given recent unprecedented circumstances, it makes sense to remain true to your well-established investment plan that takes your goals and tolerance for risk into account, and to continue to invest using the expertise of professional investment managers. They have the knowledge and experience to take advantage of investment opportunities as they arise and limit risks that be unappreciated by the market as a whole.

In closing, I would like to remind you that my team and I are here to help. Should you have any questions about your investments, I would be happy to discuss them with you.

Sincerely,

Michel Prévost

Dear friends,

I hope you and your family are well and have had the chance to be outside to enjoy some summer weather. As we enter the fifth month of the global coronavirus pandemic, COVID-19 infection rates in many parts of Canada have slowed, and restrictions are gradually being lifted. Although it is likely to be many months before our lives and work resemble anything close to “normal,” the progress is encouraging.

Here is a brief update with some of the week’s developments and related thoughts.

Macroeconomic and market developments

• North American equity markets continued move higher, with investors gaining confidence from coronavirus vaccine trial developments and improving employment and economic data as businesses in several regions re-opened.
• The United States remained the country worst affected by COVID-19 globally, with some states such as Florida reporting record numbers of infections and deaths from the disease. As rates of infection remain controlled in most parts of Canada, the two countries agreed to extend the closure of the border for non-essential travel to August 21.
• The Canadian dollar strengthened against the U.S. dollar as the Bank of Canada kept its key lending rate on hold at 0.25%. The central bank forecasts a 7.8% decline in Canadian GDP this year as a result of the pandemic shutdown and indicated that rates would remain low “for a very long time.”
• Trade tensions between the U.S. and China heightened as President Donald Trump signed legislation to impose sanctions on China in response to its interference with Hong Kong’s autonomy.

How does this affect my investments?

Equity markets in many developed economies have recovered strongly in mere months since March’s pandemic-induced downdraft, despite uncertain economic conditions and many unknowns related to the virus itself. While the market recovery has been unpredictable, so too is it is impossible to know when the next downturn will occur. Studies, in fact, have shown that attempting to “time the market” by selling your investments before a downturn can be counterproductive, as investors often miss out on significant market gains after they have cashed out. Rather, adhering to a personalized long-term investment plan that reflects your objectives, such as the one we developed to meet your needs together, typically yields better results.

If you have any questions about your investment plans, I would be happy to discuss them with you. Please do not hesitate to contact me at 450-951-8787.

Sincerely,

 Michel Prévost

Dear friends,

I hope that you and your family are well. After a truly unique quarter for capital markets, I am writing to provide you with a brief overview of some key developments during that time, as well as some insight on what can be expected as we head into the next three months of the year.
While the first quarter of 2020 was dominated by anxiety surrounding the initial outbreak of COVID-19 and the ensuing lockdowns and capital market declines, the second quarter demonstrated a remarkable bounce back in those markets – even with a resurgence of the virus in the U.S. and renewed lockdown measures.

The S&P 500 Index, a broad measure of U.S. equities, had its best quarter in over 20 years, gaining 19.95% (in U.S. dollars), while the Canadian S&P/TSX Composite Index gained almost 16% (in Canadian dollars) in the three months ending June 30. This was quite a recovery from the sharp declines by the end of Q1, bringing year-to-date returns to -4.04% (S&P 500) and -9.07% (S&P/TSX). Government bonds declined as both the Federal Reserve (the Fed) and Bank of Canada indicated rates would remain low for a lengthy period.

Energy prices rose as the economy began slowly re-opening and production cuts trimmed inventory, but not before prices fell below zero for the first time in history on April 20, ending the day at -US$37.63. This served as a microcosm of the quarter. While virus data, economic numbers and other headlines seemed bearish, markets remained optimistic and continued to climb.

Much of the market’s enthusiasm has been attributed to government and central bank intervention designed to support global economies. In particular, the U.S. Federal Reserve’s introduction of quantitative easing measures, emergency lending and purchases of corporate bonds and exchange-traded funds are believed to have played a vital part in this rise. The Bank of Canada matched the Fed’s willingness to purchase corporate bonds to assist credit markets, while indicating it believes the economy will return to growth in the third quarter. The Fed said it expects 5% GDP growth in 2021, and as for the support it has been providing to the system, Fed Chairman Jay Powell said the agency was, “not out of ammunition by a long shot.”
Headlines concerning vaccine progress and phased economic re-openings also seemed to support market moves to the upside. Promising vaccine data from various companies continued to be announced, while in early May the U.S. Food and Drug Administration granted emergency use authorization for Gilead Sciences’ antiviral drug remdesivir as a treatment for COVID-19 patients.

Investors also weighed more negative developments as the quarter came to a close, but these had little impact on the markets’ recovery. These included escalating tensions between China and both the U.S. and India, rising infections in 37 U.S. states (with 50 per cent of states halting or rolling back their reopening plans), and data showing 31.5 million Americans collecting unemployment cheques as of mid-June. The Fed said it expects U.S. gross domestic product (GDP) to shrink by 6.5% in 2020, and the International Monetary Fund (IMF) expects global economic output to contract 4.9%. Ratings agency Fitch Ratings, meanwhile, downgraded Canada’s credit rating to AA+ from AAA to reflect the deterioration of public finances due to COVID-19.

If anything, the last two quarters have proven just how important it is to stick with a long-term, diversified plan to withstand market shocks. It would have been almost impossible to predict that shortly following the close of the first quarter, the S&P 500 would have the best 50-day period in its history and the Nasdaq (a stock exchange that includes the world’s primary technology and biotech giants) would reach new all-time highs. Had we chosen to change course and attempt to time the market, we may have missed out on this rapid recovery. I continue to believe that at times of great uncertainty, discipline and the ability to remove emotion from one’s financial decisions become an investor’s most valuable asset. These characteristics, combined with your trust in me to oversee your investment plan objectively, have allowed us to navigate that uncertainty in an effective manner.

As we begin the third quarter, there is no way of predicting how the markets will react, and whether monetary and fiscal support will outweigh future outbreaks of COVID-19 and any subsequent economic disruptions. What we do know is that volatility remains a distinct possibility, and that history shows continuing to stick to a well-constructed, long-term plan has been the right move. The chart below illustrates this point nicely.

In closing, I wish you and your family well and remind you that I am always happy to discuss your investment plans. If you have any questions, please contact me at 450-951-8787

Sincerely,

Michel Prévost

 

Dear friends,

I hope all is well. Below you will find a summary of this week’s market developments and subsequent thoughts.

Market developments

• North American equity markets proved volatile this week, reacting to increasing numbers of COVID-19 infections in 27 states and fears of new lockdowns and decreased economic activity. In particular, cases continued to soar in Florida, Texas, Arizona and California.
• The International Monetary Fund (IMF) now expects global economic output to contract 4.9% in 2020, with U.S. output contracting 8.0% and Canadian output 8.4%.
• Ratings agency Fitch Ratings downgraded Canada’s credit rating to ‘AA+’ from ‘AAA’ to reflect the deterioration of public finances due to COVID-19.
• New Bank of Canada Governor Tiff Macklem said that Canada’s economy will take a long time to fully recover from lockdowns, requiring the central bank to continue purchasing government bonds to keep interest rates low indefinitely.
• President Donald Trump said that a second stimulus bill was coming and would likely be announced in the next few weeks. Weekly jobless claims in the U.S. were 1.48 million, and real gross domestic product (GDP) contracted at an annual rate of 5.0% in the first quarter of 2020.

How does this affect my investments?

A resurgence of COVID-19 cases across the United States has caused investors to consider the implications of a second series of lockdowns, something many hoped would be unnecessary moving forward. As economic forecasts continue to show the damage caused by the pandemic, it is understandable that sentiment may turn bearish in the short term.

With that said, our decision to stick with our long-term plan even when markets hit their lows in March ultimately proved prudent, and my advice is to continue to do so, even when sentiment appears to change. The chart below serves to illustrate this point, demonstrating that often times when investors turn increasingly bearish, markets may be poised to move the other way.

I am always happy to discuss your investment plans. Please do not hesitate to contact me at (450) 951-8787.

Sincerely,

Michel Prévost

     

Dear friends,

I hope you and your family are well. Below you will find a summary of this week’s market developments and related thoughts.

Market developments

• After pulling back last week, North American equity markets advanced, with optimistic economic announcements and a potential COVID-19 treatment outweighing “second wave” fears.
• Ten U.S. states saw coronavirus numbers surge more than 50% in the past week, and a new outbreak in Beijing stoked fears of a second wave in China. Scientists at the University of Oxford said that a commonly available steroid, dexamethasone, reduced deaths in patients with severe cases of COVID-19.
• In the U.S., the Census Bureau announced that retail and food services sales were up 17.7% in May, the biggest monthly jump ever recorded. Weekly jobless claims in the U.S. were 1.5 million.
• The U.S. government was said to be considering a $1 trillion infrastructure package to boost the economy, and U.S Federal Reserve (Fed) Chairman Jerome Powell announced that the Fed will begin to purchase individual corporate bonds.
• Prime Minister Justin Trudeau announced that the federal government is working to extend the Canada Emergency Response Benefit (CERB) for workers who can’t yet return to their jobs, and that the government would provide a “fiscal snapshot” on July 8.
• Statistics Canada reported that manufacturing sales fell by a record 28.5% in April and 37.1% year-over-year. Consumer prices rose 0.1% in May, but were down 0.4% year-over-year.
• Geopolitical tensions heightened as North and South Korea, as well as India and China, engaged in separate confrontations. North Korea blew up an inter-Korean liaison office and rejected an offer by South Korea to send special envoys, while Chinese and Indian soldiers engaged in a deadly border clash.

How does this affect my investments?

Clearly, markets have taken an optimistic view of economic and pandemic-related developments over the last few months, focusing on positive data while brushing aside most concerns. Much of that may be related to the continued willingness of governments and central banks to step in with significant support at any signs of possible distress. We saw this once again this week with the Fed’s announcement regarding bond purchases, the Canadian government’s attempt to extend CERB payments, and the prospect of the Trump administration’s $1 trillion infrastructure package.

While this short-term reaction does not mean things will play out similarly in the future, it is worthwhile to note that amid a global pandemic and recession, with no certainty on an ultimate solution for COVID-19, markets have proven resilient. The plan we have built together is designed to benefit from that type of resilience over the longer term.

I’m happy to discuss your investment plans if you feel it would be beneficial. Please do not hesitate to contact me at 450-951-8787.

Sincerely,

Michel Prévost

Dear friends,

I trust that all is well. Below you will find a summary of this week’s market developments and related thoughts.

• Following the best 50-day period in the history of the S&P 500 Index (which measures the stock performance of 500 large companies listed on stock exchanges in the U.S.) and the Nasdaq (a stock exchange that includes the world’s primary technology and biotech giants) hitting new all-time highs, North American equity markets fluctuated throughout the week.
• Anthony Fauci, Director, National Institute of Allergy and Infectious Diseases, stated that the coronavirus outbreak “isn’t over yet” as hospitalizations in at least nine states have risen since Memorial Day (May 25).
• Opposition parties refused to give unanimous consent to Canada’s Liberal government to speedily pass new emergency COVID-19 legislation, which is focused on expansion of the wage subsidy program and penalties for fraudulently claiming the Canada Emergency Response Benefit.
• The U.S Federal Reserve said it expects interest rates to remain near zero through 2022, and while U.S. GDP is forecast to shrink by 6.5% in 2020, it is expected to bounce back to 5% growth in 2021.
• Weekly jobless claims in the U.S. were 1.54 million.

How does this affect my investments?

The fact that the S&P 500 gained 40% in just 50 days – even as the economy falls into a severe recession – should give most investors pause when they consider trying to “time” the market. You may have heard the saying, “It’s time in the market, not timing the market,” and the last few months have lent credence to that statement.

When the coronavirus first emerged and the lockdowns began, it was difficult to foresee the sheer extent of stimulus that governments and central banks would provide to keep economies and markets functioning. Those who remained invested benefited from those measures.

That said, there are no guarantees on how markets will react in the future. What we can be sure of is that missing such sudden moves to the upside can greatly hurt a portfolio. That’s why I believe in being patient and staying committed to your investment plan.

I am always happy to discuss your investment plans if you feel it would be helpful. Please do not hesitate to contact me at 450-951-8787.

Sincerely,

Michel Prévost

 

Dear friends,

I hope you and your family are well. Below you will find a summary of this week’s market developments and some related thoughts.

Market developments

• Despite civil unrest across the United States, escalating American tensions with China and an ongoing battle with COVID-19, North American markets once again moved higher.
• White House health advisor Dr. Anthony Fauci expressed optimism that one of the many coronavirus vaccine trials would prove effective and stated that the U.S. should have 100 million doses of vaccine by the end of year.
• The Canadian government announced it will offer cities $2.2 billion in infrastructure money to help cover COVID-19-related budget shortfalls.
• The Bank of Canada held interest rates steady and indicated that it expects the economy to resume growth in the third quarter.
• Weekly jobless claims in the U.S. were 1.87 million, reaching 42.6 million in the last 11 weeks.
• The U.S. announced plans to block Chinese airlines from flying into or out of the country after China had effectively already done the same for the U.S. China also asked its state-owned firms to stop buying U.S. soybeans and pork amidst continued tensions between the two nations.

How does this affect my investments?

Global capital markets continue to brush aside a number of conflicting developments as they stage a strong recovery from the March lows.

While many investors may claim this recent rise is remarkable, it is for exactly this reason that my advice to you has been to stick with the long-term plan we built. Months ago, had we imagined a global pandemic, a gradual re-opening of economies after an extended shutdown and protests throughout America all taking place as we head into June, you would have been hard pressed to find someone predicting that markets would continue to move higher right through it. Yet here we are.

By adhering to the plan we mapped out together, we have the luxury of being able to observe surprises in either direction in the context of a longer-term strategy; and regardless of where markets go from here, such a perspective is valuable – particularly the next time we are faced with strong volatility.

As always, I am happy to discuss your investment plans. Please do not hesitate to contact me at 450-951-8787.

Sincerely,

Michel Prévost

Sources: CI Investments Inc., newyorktimes.com, cnbc.com, abcnews.com, ctvnews.com

IMPORTANT DISCLAIMERS ASSANTE

This material is provided for general information and is subject to change without notice. Every effort has been made to compile this material from reliable sources however no warranty can be made as to its accuracy or completeness. Before acting on any of the above, please make sure to see a professional advisor for individual financial advice based on your personal circumstances.

 

Dear friends,

I trust that all is well with you and your family this week. Below you will find a summary of this week’s market developments and some further thoughts.

Market developments
• North American markets again moved higher on continued optimism over re-openings; all 50 U.S. states have now at least partially re-opened their economies.
• White House health advisor Dr. Anthony Fauci stated that a second wave of coronavirus is “not inevitable” if states re-open correctly, and said there’s a “good chance” a vaccine could be deployed by year’s end. As of May 27, new cases in the U.S. rose at a rate of 1.2%, down from 1.4% in the week prior.
• The European Union is said to be preparing a fiscal package worth more than $800 billion, and Japan is planning new economic stimulus valued in excess of $1 trillion.
• Weekly jobless claims in the U.S. were 2.1 million, passing 40 million in 10 weeks. Real gross domestic product (GDP) contracted at 5% in the first quarter.
• Tensions between the U.S. and China escalated as the House of Representatives passed legislation calling for sanctions against Chinese officials.
How does this affect my investments?
In previous letters, we have discussed the importance of sticking to your long-term plan, despite current market conditions. The incredible recovery we have seen since the recent market lows have included some very large gains on certain days, which have caught investors by surprise. By sticking to our plan, we look to avoid the risk of missing out on such days. Conversely, the chart below demonstrates what can happen to those who do try to time market moves.

This is not to say that this recent run will continue, nor that anyone is sure how North America’s return to normal will progress. It means that we are taking the approach that we believe will ultimately best align with your long-term goals.

Source: thesimpledollar.com. For illustrative purposes only.

Sources: CI Investments Inc., Bloomberg Canada, cnbc.com.

IMPORTANT ASSANTE DISCLAIMERS

This material is provided for general information and is subject to change without notice. Every effort has been made to compile this material from reliable sources however no warranty can be made as to its accuracy or completeness. Before acting on any of the above, please make sure to see a professional advisor for individual financial advice based on your personal circumstances.