My last email talked about how business optimism had steadily increased going into the summer and how high Global Stock Markets had risen. We have seen some choppy waters since then but hit fresh record highs in Canada and the USA this July1. Much of this momentum here in Canada is directly related to lower case numbers and the economy continuing to open up. It's been very hard to separate the pandemic and the economy over the last year and a half. Canada's optimism has to do with case numbers plummeting throughout the early part of the summer and restrictions being lifted. We ended up with positive GDP growth for the second quarter of 2021 which came after some negativity in April and May2. While Canada's pandemic situation appears quite hopeful, that's not the case everywhere else. South of the border, States like Florida (who has less than 60% of the population of Canada) have seen case numbers surge. Florida's daily cases have been twenty times higher than our whole country3). Based on what we are seeing in many States and a number of other countries, we will need to brace ourselves for what will come next. If our largest trading partners struggle, we'll likely feel that impact here.
We have spent a lot of the last few months discussing re-balancing with clients in order to take some profits. After such a strong run in the Equity Markets, we're finding opportunities to top up more defensive assets with some of the gains we have received elsewhere. The big question now is whether we will continue to see Inflation run at the higher levels we've recently experienced. Some are calling for a normalization to the Cost of Living while others think we'll be dealing with Inflation for some time yet. Please let us know if you'd like to discuss ways of getting more defensive in this environment and we'll make a plan to go over some options.
After a tough year where we have had a number of family members, friends, neighbours and clients get sick with COVID-19, we are finally more optimistic that we are getting through this. We know that some of you have been personally affected by the pandemic and we know that some of you have lost friends and loved ones. Our hearts go out to you and we wish you all the best for the back half of the year.
Bryce A. Borden
1Yahoo! Finance: - https://ca.finance.yahoo.com/world-indices
2The Globe and Mail: - https://www.theglobeandmail.com/business/article-canadian-economy-most-likely-grew-by-07-in-june-after-may-dip/
3Johns Hopkins University: - https://coronavirus.jhu.edu/region/us/florida