Market and Investment Insights

November 2020

Vaccine Relief Rally

In a remarkably short time, three pharmaceutical heavyweights (Pfizer, Moderna, and AstraZeneca) have announced they’re nearing the final stages of developing a COVID-19 vaccine. The surprisingly high effectiveness of some of the candidates spurred a rotation in equity markets, with capital favouring companies that have been left out of the rally that has mostly benefitted high-growth and tech sector stocks. The rotation to value-oriented stocks may be premature, but it’s a trend that is likely to continue and we will be monitoring closely in the months to come.

Canada has long been criticized for the lack of interprovincial cooperation on trade, although a new economic plan released by the Quebec government could bring about a tête-à-tête that benefits the country and the environment. Quebec’s new Plan for a Green Economy looks to increase electricity exports, attract companies looking to benefit from green energy, convert off-grid systems to renewable energy, and to produce hydrogen for energy use. To avoid being left behind and suffer a ‘brain drain’ of individuals and corporations looking to greenwash their operations, other provinces may need to follow suit with their own plans, benefiting renewable energy stocks.

The U.K. and Canada announced an interim post-Brexit trade deal which, in its preliminary form, aims to eliminate tariffs on 98 percent of goods traded between the two countries. The U.K. will transition out of the E.U. at the end of 2020 and would lose any tariff exemptions extended to it through the partnership at that time. A group of Asian-Pacific countries formed the world’s largest-ever trade bloc through the ratification of the Regional Pacific Economic Partnership (RCEP). The agreement consists of 15 countries, including China, Australia, and Japan and covers nearly a third of the global economy. The deal puts renewed pressure on President-elect Joe Biden to have the U.S. rejoin the Trans-Pacific Partnership to increase pressure on China’s trade dominance in the region.

Ahead of Finance Minister Chrystia Freeland’s fiscal update, credit rating agency Moody’s Investors Service reiterated Canada’s top credit rating, stating that the country’s economic fortitude from its “policy effectiveness” makes it resilient to economic shocks. Canadian GDP is expected to contract nearly 6% in 2020 before rebounding sharply in 2021 and 2022.

 

 

Portfolio Contributors

  • The overall risk-on sentiment pushed ARK Innovation ETF (ARKK) shares higher as the constituents rallied, with the fund ending the month up 23.73% in local-currency
  • Broad global equity exposure contributed to strong monthly returns, with the BMO Global ESG Leaders ETF (ESGG) being the largest contributor as it gained 9.91%

Portfolio Detractors

  • The Ninepoint Gold Bullion Fund (NPP226) was the only position ending negative for the month, down 7.84%. Vaccine news from Pfizer-BioNTech caused a 5% intraday drop in gold prices. The positive news may signal a speedier return to normal and smaller required stimulus, reducing demand for the precious metal as a hedge.
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To achieve pleasing long-term returns, investors sometimes need to feel the discomfort of owning businesses that don’t offer the short-term peace of mind that most of the market craves. This video explains why successful investors embrace times of uncertainty.