We’ve seen some very exciting news from both Pfizer and Moderna regarding a COVID-19 vaccine and this provides a tangible light at the end of the tunnel. Looking forward, the next steps will include an FDA meeting in early December to discuss the Pfizer vaccine and potentially Moderna’s as well. This could lead to Emergency Use Authorization for the vaccines in the U.S. by the end of 2020 with some lag in Canada.

We see the first quarter of 2021 potentially being a period where the vaccine would be made available to health care workers and high-risk members of the population. Six-month safety data should be available by around March, leading to the potential full approval of the two vaccines by April 2021. Once the vaccine is made available, distribution capability will be an important area of focus. Although seemingly straight forward, vaccines will not only require mass manufacturing, but they will also need to be allocated properly across health care jurisdictions. Considerable thought will also need to be placed on figuring out bottlenecks and effectively administering the vaccine to patients.

There are many optimistic forecasts for the United States being able to administer the vaccine to all willing participants by mid-2021. We like to err more conservatively and say this is likely to be accomplished by early Fall 2021. There will inevitably be some lag to this in Canada but we feel comfortable that we will be in a more normalized environment 12 months from now, albeit in an environment that entails some levels of social distancing, mask wearing etc.

We think there are many differences between what happened in 2000 and what is taking place today. This isn’t to say that the sector couldn’t face some relative underperformance if we see flows towards more cyclical areas of the market, but we feel very good about the long-term opportunity for the group in a more normalized environment.

The 2000 tech bubble was driven by levels of euphoria that we haven’t really seen in the run up this time around. In 2000, we were really just at the beginning of unlocking the internet economy. Stocks began pricing in an opportunity that was still years away and as stocks in the sector moved ever higher, the market began using extreme valuation measures such as price-per-user, price-per-engineer, etc.

Furthermore, the IPO market was rampant with seemingly every issue doubling on day one. This period is much different. While there is likely overvaluation in high growth technology names, we think that generally the sector is not unreasonably priced. The current ecosystem is much more developed with companies going public today. They exhibit more advanced and real business models. This wasn’t the case during the Tech Wreck.

COVID-19 has really acted as an accelerator of many important trends, especially e-commerce. We believe many new behaviours have been ‘internalized’ such that most of these trends will continue even in a post-COVID era, though they likely need some period of consolidation.

For instance, we would expect some return to brick-and-mortar shopping but the past several months have likely introduced a new set of people to online commerce that aren’t fully going back the other way.

Virtual meetings are another area that we believe is here to stay, though probably not to the same level that we experienced through the peak of this pandemic. Home gyms and virtual fitness is maybe an area of higher risk of reverting to old norms. And telehealth is another opportunity that is still pretty early in its adoption phase but is likely to continue growing post COVID-19.

Mega-caps are exceptionally well-positioned and have solid secular tailwinds. We believe that the valuation for most can be justified over the medium term. Most mega-caps can make a claim on future exposure to AI and this represents optionality for areas of growth.

To focus on one name in particular, Google stands out and has just recently started outperforming. In a world where all commerce has to rely increasingly on digital, Google is exceptionally positioned. Google also benefits from the eventual return of travel (i.e. Google Flights, Google Travel), so it has cyclical exposure.

A key to understanding Google is the non-linear behaviour of AdWord pricing as competition for keywords increases. Google and Facebook are market leaders of first-party data, which is key to AI.

The U.S. Presidential election outcome was favourable for alleviating some regulatory risk for tech stocks. The divide in Congress likely makes it difficult to pass any substantive measures against the industry. However, we don’t think the rhetoric dies as this isn’t a completely partisan issue.

The outcome, assuming the Georgia run-off elections don’t swing the Senate, was also positive for healthcare from a regulatory perspective.

There are some bipartisan issues that are likely to still be addressed such as out-of-pocket drug costs, but substantive change seems unlikely. Having said this, there is still some risk around Obamacare where we are waiting on yet another Supreme Court decision in the spring.

U.S.-China relations are another seemingly bipartisan issue, but we believe that the new administration will offer a more pragmatic approach. This will allow for more visibility for businesses to make more confident supply chain decisions which should help reduce the volatility of recent years.

We think there are many strategically important long-term considerations from this announcement. We are still formulating our thoughts around the subject, but some early conclusions include:

• This is a big leap forward for Apple, as early specifications for the M1 chip look to be substantially better than anything on the market.
• This could provide an opportunity for considerable market share expansion for the Mac as Apple could pass through some portion of the cost savings onto consumers, in addition to having a superior performing device.
• It opens up the potential for greater inter-operability of Mac with other Apple devices. There is a lot of opportunity for Apple to strengthen their ecosystem.
• This is yet another blow for Intel as they lose a decent size of their revenue base. It is also a validation of the Arm architecture for PCs which potentially exposes Intel to risk of losing other PC customers over time. While not a direct read-through into other markets such as the data centre, we still believe that the validation of an Arm-based system beyond mobile does provide opportunities in other key markets, especially if Nvidia is successfully able to get regulatory approvals to acquire Arm.