Hello. My name is Eric Lascelles. I’m the Chief Economist for RBC Global Asset Management, and very pleased to share with you our latest weekly video MacroMemo.

And in this latest edition we’ll cover a range of subjects. We’ll certainly talk about the latest COVID-19 infection trends. We’ll give an updated view on how quickly you might reasonably expect this second wave to recede, once it begins to recede at least. And also some additional perspective on coming vaccines and that rollout that is now indeed under way.

From an economic standpoint, we’ll review the latest economic developments. In particular, some strong November data, which is a welcome surprise. We’ll celebrate some healthy financial conditions, and we’ll assess the probability of imminent fiscal stimulus in the U.S.

And then, from a more political perspective, we’ll talk a little bit about Iranian geopolitics. We’ll acknowledge the Brexit outlook and how that’s evolving as the deadline grows awfully close. And we’ll also just mention briefly at the very end the Great Reset, which is a term a lot of people have been asking me about, and so I thought it would be nice to share some thoughts on that side.

Let’s start on the positive side of the ledger here and so positives include several things. The one, and perhaps most obvious one, would be that the European second virus wave continues to recede. That’s a very welcome trend. And indeed more quickly than initially expected. Not long ago we had talked about how it might take three to six months to get the European numbers back to more familiar-looking levels.

And, not that they’re back to normal yet, but in fact it’s coming back more quickly than that. And so I would say it’s quite conceivable if these countries continue to apply pressure that they do return to normal over the span of a few months, instead of more like three to six months.

Now that said, I should warn that France and the UK in particular seem to have stopped improving significantly, and so that story could yet change. And it’s conceivable those countries need to do a little bit more to keep the momentum going. But in general, I guess the point is we’ve been pleasantly surprised by the rate of improvement so far, albeit at an economic cost via additional social distancing.

Turning to vaccine news, well it remains mostly positive. And so one particular poll we continue to track has become more optimistic over the last few weeks. And so for instance, a few weeks ago a survey had argued that 72% of respondents thought that the U.S. would get 25 million inoculations by the end of May. That’s up to 95% of people expecting that. And so, in fact if anything, likely sooner than the end of May in terms of achieving that particular milestone.

So there’s rising optimism with regard to timing. Of course the efficacy rates appear to be quite good based on what we know so far. And so in general the vaccine story seems to be coming together quite nicely, and indeed inoculations have now officially begun in the UK at least for emergency usage. And the expectation is that the likes of the U.S. and Canada shouldn’t be too far behind, conceivably even within the next week or two. So that is now moving along.

Do be aware, I guess one thought with regard to timing is, do be aware that from the first inoculation it’s still about six weeks until that person can reasonably expect to be protected from the virus. And so that is to say, you get a first inoculation, four weeks later you get a second one, then you need two weeks for the body’s immune system to fully respond. And so it’s still a lengthy process, even as these come out. But nevertheless it’s wonderful news that this is now starting to happen.

And prioritization is becoming clearer. And so the general principle across countries is that the first round of inoculations should go to health care professionals, first responders, high-risk individuals, older individuals. Then the second wave—good wave in this case—of vaccines should go to those who live or work in a setting with some risk. And then lastly would be everyone else, and so people working from home without age or other infirmaries in the end likely get this last. And so perhaps waiting until the second half of 2021. So it will be some time for many of us.

Pivoting from there to the economic data, let’s acknowledge really the big thing that catches my eye is that we’ve now started to see November economic prints, and actually they’ve been pretty decent. And so in the U.S., we saw ISM manufacturing and services indices, those retreated a little bit but they’re still consistent with moderate growth, which we’re very happy about.

The latest weekly jobless claims in the U.S. improved, which is most welcome. We’d seen two weeks of deterioration, which was making us nervous. And so happy to see a significant improvement. And then in the U.S., November job numbers were released and as much as they didn’t quite meet expectations and you could debate the details if you like, in the end several hundred jobs being added. And so we can say with a pretty good level of confidence that the U.S. economy was growing in November, and it seems the same way for Canada.

And so in Canada, we had the CFIB small business confidence measure actually rise to a pretty good-looking level. We had a manufacturing confidence metric also rise to a pretty decent looking level. And Canadian job numbers actually exceeded expectation and indeed added jobs in the month of November.

And so we weren’t sure at all that the Canadian economy would grow in November. We were seeing lots of provinces tighten things up from a social distancing perspective; it was easy to imagine perhaps a slight economic decline. Looks like that didn’t happen. I still think there could be a month or two of decline out there, perhaps in December or beyond, and so we’re still budgeting for that in our forecast. But we’ve been pleasantly surprised by the month of November, and certainly we’ll take that every day of the week.

A quick word on copper prices. Copper prices are at a six-year high right now. And you may not know this but copper is often referred to, at least in economic circles, as Doctor Copper because it is alleged to have a PhD in economics. When copper prices are rising that’s usually a very good sign for the economy. And so as much as we can dig into the details and acknowledge it’s in part rising demand, which is the good economic news, it’s in part limiting supply, which is less relevant to the economy but nevertheless a positive sign in there from an economic outlook perspective. And then a quick word about financial conditions. And so I want to mention those just because normally in a recession and emerging from a recession, financial conditions are quite tight. They’re quite challenging. Credit spreads are high making it expensive to borrow. Stock market is usually down, making it hard for companies to operate normally. And so for all of those reasons, normally this is a limitation on the recovery, and moreover even when a recession starts in one little sector, tight financial conditions then bleed the problems into other sectors. And every sector has trouble borrowing and has trouble growing.

And that just hasn’t been the case this time. Financial conditions are the easiest that we have seen, possibly ever. Certainly in a very long time. And so this is providing a tailwind as opposed to a headwind. And it’s not a surprise that we’ve gotten here. Central banks have done extraordinary things and kept markets open. And fiscal policy has also been very aggressive and that really is the key to healthy financial conditions. But let’s make that point, and so I guess as we look forward and we recognize some social distancing measures being introduced, and of course damaging the most social of sectors, we can say that it’s not necessarily a case that has to bleed its way into other sectors, because there isn’t that transmission mechanism from financial conditions that there usually is.

Let’s talk for a brief moment about U.S. fiscal stimulus. And so U.S. fiscal stimulus has been fading, really ever since April but prominently since the end of July. And so that’s been a source of concern, and some lower income Americans are now starting to run into financial trouble. And so there’s been some aspiration of delivering another financial or fiscal package.

And there’s now a bipartisan proposal. It’s a $908 billion proposal, and it looks as though the timing though is very tight on this. And so an effort is being made. However the House of Representatives last sits on December 10 before its holiday break. December 11 represents the deadline for avoiding a government shutdown. And so something does need to be done, as I record this, very, very soon.

I will say it’s not impossible the fiscal stimulus gets done. I think it’s probably going to be a much narrower solution, what’s called a continuing resolution that just keeps the government in the U.S. operating. I suspect we may have to wait until Biden is president in late January to get a proper fiscal deal, but it’s not impossible we get something in the next several days. And so we’re watching that quite closely.

And so a lot of what I’ve said has been positive, and so that’s certainly welcome. However, I would say there is one big negative out there to acknowledge as well, and that would be the North American virus trajectory is quite challenging right now. And so the U.S. numbers are very difficult. Record number of infections per day. Not a record number of fatalities, but gosh it’s rising quickly and it is very high. 2,250 deaths per day in the U.S. And not all that far from the peak last spring. And so this is a very difficult situation.

And as much as we see some states responding—California has recently tightened considerably—arguably in the end, not enough quite to tame these numbers. And for a moment last week we thought maybe somehow the U.S. was flattening out and ceasing its deterioration, but we were suspicious. We thought it was probably a Thanksgiving phenomenon just because people weren’t getting tests and tests weren’t being run. And indeed that was the case. Unfortunately the numbers are getting worse there again. And so no immediate end in sight from my perspective.

From a Canadian perspective, frustrating as well to be honest. And so we look at Canada and we thought the policy tightening in Canada to this date would be enough. The social distancing rules in Ontario, Quebec, BC, maybe Alberta, probably Manitoba, et cetera, we thought they would likely suffice in terms of controlling the spread, and that just hasn’t been the case. We’re still seeing the Canadian numbers rise, and this second wave is proving much more challenging in some ways than the first wave in terms of taming, and that was the European experience.

And so I won’t make any kind of bold claims as to a peak coming in the next week or two. I think it’s possible, but I’ve made that claim a few too many times to be truly credible at this point in time, and so I’ll just say I guess we’ll see, but my fear is we might need to see another round of tightening in Canada first before we get a significant decline in transmission.

Let me spend a moment on Iranian geopolitics. And so not a subject we’ve talked about much lately, but you may recall before the pandemic it was the big subject. We were seeing all sorts of exchanges, and drone attacks, and ship bombardments, and bombs, and missiles, and there was a downed passenger jet, tragically. And so all of this was happening before the pandemic. Iran was quite central from a geopolitical perspective.

And so things are heating up again. And so you may be aware that Iran’s chief nuclear scientist was recently killed. You may have heard that President Trump is reported to have asked what his options for attacking Iranian nuclear sites were, though in the end I believe he opted not to pursue that strategy.

And the reason all of this is coming to a head now is that when Biden becomes president, the thinking is he might be more conciliatory toward Iran, much as Obama was before him. And so Iran Hawks, the people who don’t like Iran, need to act now in the next six weeks if they want to alter the dynamic. And so that would be some of Iran’s enemies in the Middle East, perhaps Israel, perhaps U.S. hawks as well.

And so not to say we expect further big problems over the next six weeks, but it is an elevated risk and we have seen a few things happen already. And of course selfishly from a financial market perspective, the reason we think about this and care a lot about it is primarily because the price of oil is intertwined with Iran. Not just because it produces oil, but because it could conceivably pinch the Strait of Hormuz, which is a channel through which a great fraction—around 30%—of the world’s oil travels.

And my last—or second last subject, pardon me—is the Great Reset. And so this is to say there’s been a lot of talk about how society has accomplished and is accomplishing maybe great things in the context of trying to tame COVID. Big effort to get vaccines. Lots of fiscal support and income support for people on a scale we haven’t seen before. And so the thinking is maybe society and humanity should aspire to other great things.

And one of the things that’s been put forward is maybe society should pursue fairer outcomes, dealing with things like inequality, and poverty, and environment, with the same kind of effort and enthusiasm that COVID-19 has been dealt with. And I guess I would say, I think the environmental side is already happening. I would say it seemed to me it was gaining momentum before the pandemic. And so I’m not sure I would link the two, but I think that element is happening.

However you’ve got two problems if you want to pursue the rest of this. And the first would be the partisan divide is as big as ever. I’m not hearing politicians on both side of the aisle suddenly agree with each other and setting a course forward. There are still big disagreements and, therefore, big limitations on what governments can accomplish.

And the other one is, you have to repair the fiscal damage that’s been done recently. There’s going to be a huge prioritization of restoring economic growth and economic output and jobs. And so my suspicion is some of these aspirations will fall by the wayside as other more immediate concerns dominate. And so I’m not expecting the Great Reset to radically change the world, but certainly it is making people think and that’s probably a good thing.

And then lastly, in the briefest of thoughts on Brexit. And so the Brexit deadline is the end of this year. We’ve had negotiations for years and years at this point in time. France recently throwing a wrench into things, threatening to veto any trade deal over fishing rights. The UK on the other hand, removing an obstacle recently by saying it will not introduce what was viewed as illegal language into an internal bill that would’ve violated some things they’d agreed to with Europe beforehand.

And so I’ll walk away from that saying, I do think there will be a trade deal. I would say more than 50% chance, but far from certain. But boy the timing is going to be tight given that the Brexit interim arrangement does expire at the stroke of midnight on December 31, so we’ll be watching quite closely. Okay. That’s it for me. Hope you found some of those topics interesting and please consider tuning in again next time.