ANGUS WATT ADVISORY GROUP SUMMER UPDATE 2020
- Market momentum is due to continued support from the Federal Reserve and other central banks.
- Wearing masks can allow the economy grow at 90% of capacity.
- COVID-19 has accelerated global transition in technology.
- For example, retailers starting e-commerce and people working from home
- We do not see inflation coming back any time soon.
- Short term, limited product selection has increased costs of some goods.
- Long term, there is a lot of capacity to supply all goods.
- Longer term we think there will be repatriation of goods and services and China will be the hardest hit.
- National Bank Financial has reduced exposure to emerging markets in discretionary portfolios.
- National Bank Financials’ tactical asset allocation is over-weight in equities and the team is watching carefully to see if there is a second wave of COVID-19.
- Not yet time to increase credit risk as we are still in a 90% economy.
- The TSX is down 7% for the first half of 2020.
- Canadian stock market is very narrow.
- Without gold, the TSX was down 10.4% without Shopify it was down 11.1% and without both the market was down 14.4%.
- The equity markets globally will continue to be driven by expanding price/earnings ratios.
ENERGY AND THE ENVIRONMENT
- Chevron is installing solar panels to power their oil pumps at the Lost Hills field in California. The panels provide the field with 80% of its electricity, equal to taking more than 4,000 cars off the road.
- New York State is buying up to 4,000 megawatts of clean energy, enough to power 1.5 million homes.
- During the past 3 months, renewable energy has accounted for 44% of the output across the European Union and Britain vs 37% in the same period last year.
- Israel approved the construction of an undersea pipeline to supply natural gas to Europe.
- Microsoft, Nike, Starbucks, Unilever and Danone have started a new consortium to share resources and tactics for slashing carbon emissions.
- Target, Walmart and CVS Health started a joint initiative “Beyond the Bag” to:
- research new materials for bags
- develop technology and delivery systems to make bags obsolete.
IMPACTS OF COVID-19
- In the past week, 25 large US companies have indicated that they plan to reduce their office space in the year ahead, including Facebook, Halliburton, State Street Corp, Sleep Number.
- Medipac Travel Insurance and Canadian Blue Cross have both restored medical emergency coverage for COVID-19 to their travel insurance policies.
- China will provide a $1 billion loan for Latin American and Caribbean countries to have access to its COVID-19 vaccine when it is available.
- Japan’s largest bank is installing giant robot scanners to digitize millions of documents used to verify customer’s identities.