Market Commentary

Making Cents of the Markets

New episode of Ready.Set.Retire! Listen to Lori and Jon interview Dr. Dorothy Reddy as they dive deeper into anxieties regarding COVID and how the pandemic has affected present and future retirees. Check it out here.

Listen to this week’s Making Cents of the Markets on CKNW where we discuss what the economic recovery depends on and how a second wave affects investor confidence. Listen here.

Be in the Know

North American markets rallied 2-3% this week as they started in a volatile manner but finished the week higher on positive sentiment based mostly on stimulus expectations. President Trump sent markets lower to start the week after tweeting that he instructed his administration to stop stimulus talks until after the election, when he expects to approve a large stimulus package after his victory. Markets bounced the following day as he appeared to walk back on this message and engaged Democrats on negotiations to potentially put in place immediate measures to support certain hard-hit areas of the economy. These gains continued throughout the rest of the week as the market believes that a large stimulus package will be approved no matter which party attains power after the November 3rd election.

We are not optimistic that a deal will be reached prior to the election but think that markets have been bullish lately due to Biden’s lead in the polls and higher likelihood of a potential sweep of the House, Senate, and Congress. A victory of this nature would give the Democrats a more unified government and more control around passing a stimulus bill which the market saw as a positive as gains were broad across most sectors this week. Market conditions have improved though volatility remains high as many market participants still expect larger market swings into the end of the year.

In Canada, we saw a very strong jobs report on Friday as 378,000 jobs were created in September, handily beating the 150,000 consensus, and sending the unemployment rate lower to 9% from 10.2% the previous month. Our nation has now recovered approximately 2.3 million jobs of the 3 million lost in March and April combined. Sectors that saw large improvements included manufacturing, education, recreation, and transportation. Most of these jobs were permanent (vs. part-time work) as public sector hiring spiked to decade highs as the government added over 140,000 new jobs in the past month. Otherwise, Canadian housing starts declined by 20% after 4 months of increases as pent-up demand has waned lately though these figures remain bullish as the housing market continues to be supported by low interest rates and strong demand in the near-term.

Our Strategy

Despite the strength in markets this week, we remain well diversified and generally conservative with our equity exposures given ongoing uncertainties in the near-term around the election. Market health has steadily improved over the past week which is positive to note as it is possible that a near-term bottom was put in the market last week. We must navigate these uncertainties with caution but confidence as we know that we are in a bull market and expect positive returns for years to come due to a synchronized global recovery fueled by continued stimulus supporting gold and other assets.

The market will shift its focus towards earnings season in the coming weeks which will give us a clearer picture on how our portfolio companies and targets are performing throughout the latest stage of the recovery. One could argue that these companies’ guidance for the coming year is more important as we will be paying close attention and actively shifting exposures towards stronger areas of the economy and market moving forward. We continue to remain nimble as conditions change through this recovery.

Chart of the Week

2020 has been a historical year in many ways that will never be forgotten. Simply put, the global economy has never gone through such a shock where so many individuals and businesses were immediately impacted. This can be seen best in the chart below that highlights the job losses during this year’s recession vs. all other post WWII recessions:

The recovery continues to snapback faster than past recessions given the nature of phased re-openings and a return of consumer confidence supported by stimulus. We expect this pace of job growth to start to slow as we eventually see a similar pace of recovery as past instances. This is of course is dependent on the path of the virus and continued supportive efforts which remain uncertain though what we are confident on is that the worst is behind us.

Beyond the Markets

Staying at home can be a little challenging at times, but every day companies and individuals are finding new ways to spark curiosities. Take for example Google’s Arts & Culture department, who is offering to take you on an art tour around the world – for free! Experience the best museums from London to Seoul in the comfort of your own home with Google’s online tours and exhibit. The program features content from over 2000 leading museums and galleries from around the world so that you can learn about your favourite art pieces without ever leaving home! To find out more or explore a gallery, click here.

The comments and opinions expressed in this newsletter are solely the work of Pinkowski Wealth Management, not an official publication of Canaccord Genuity Corp., and may differ from the opinion of Canaccord Genuity Corp’s. Research Department. Accordingly, they should not be considered as representative of Canaccord Genuity Corp’s. beliefs, opinions or recommendations. All information is given as of the date appearing in this newsletter, is for general information only, does not constitute legal or tax advice, and the author Pinkowski Wealth Management does not assume any obligation to update it or to advise on further developments related. All information included herein has been compiled from sources believed to be reliable, but its accuracy and completeness is not guaranteed, nor in providing it do the author or Canaccord Genuity Corp. assume any liability.