And we’ll talk, as always, about the latest COVID numbers, and indeed an improving third wave in much of the world. We’ll also talk about new variants of concern that could yet elicit future waves. We’ll talk about the vaccination campaign as well, and then we’ll pivot into the economic data side of things and acknowledge some weakness in the April data that’s been coming out, just about around the world, but then subsequent strength that we’re getting in leading indicators thereafter.

We’ll also spend a little bit of time comparing the third wave of the pandemic, which has recently happened, to the second wave, which happened around the turn of the year, and compare the economic damage. We’ll talk a little bit about globalization, whether it’s actually in retreat or not, and we’ll also just touch on a few of the key geopolitical issues out there, which frankly we’ve been neglecting, at least in this forum until recently.

Let’s start with the virus numbers. And so the third virus wave is now in rapid retreat, I’m happy to say, in most developed and most emerging countries. In fact, it’s quite a significant drop in daily infections that we’re now seeing.

And perhaps the poster child for that would be India, which had the most cases per day, the record in fact up until quite recently. It’s now down almost 50% in terms of its daily case rate. So quite a significant improvement, though hardly low numbers from them. And that reflects what’s happening in a lot of places.

It’s maybe worth flagging Japan as well. Japan had been suffering its own worst outbreak quite recently, and it was I guess timely or sensitive from a global perspective in that the Olympics are now set just two months away. And Japan is also now beginning to improve. So we’re seeing a lot of countries with that kind of trajectory.

And then the usual suspects—the U.S., European Union countries, also Canada—also continuing to improve. And so the U.S. is improving slowly because they haven’t locked down. Most of those other countries are improving more quickly because they did opt to lock down.

In the Canadian context, the great majority of provinces and all of the largest provinces are now improving quite notably. And actually approaching, if not exceeding—or falling below, I should say—their prior troughs in terms of the low level of infections between the second and the third waves.

The concern we have though in specific reference to the pandemic is with these variants. And so the British variant already effectively took over the world. That’s why there was a third wave arguably. Now there does seem to be an Indian variant at subtype 2 for what it’s worth. And it’s a pretty real concern right now.

It’s been fairly well-established, mostly based on UK research, that it’s 50% more contagious than the British variant. The British variant was 50% more contagious than the original virus, and so this is not an ideal situation. This means this is a highly contagious virus, and actually it is not just a rising share now of the UK cases, but actually the UK case count is beginning to go up.

And so we do flag the risk that there’s a fourth wave out there as the Indian variant or something like it spreads around the world. That’s a real risk right now. To add to the bad news, Public Health England has recently conducted a study, and they’re reporting that although the vaccine efficacy is fairly similar between the British variant and this new Indian variant when you have two doses, for those with only one dose, actually the Indian variant is much better at bypassing that partial protection. It’s only a 34% level of efficacy against the Indian variant versus a 51% level of efficacy against the British variant. And so unfortunately what that means is those second doses need to get into arms quite quickly to stop a theoretical fourth wave from the Indian variant. So fairly serious business there. That’s the big pandemic risk I suppose as I see it.

There’s another murkier one though I should acknowledge, which is there now may be a Vietnamese variant. At least the Vietnamese government has announced as such. They’re saying it’s actually a combination, a genetic mix, of the UK and the Indian variants, neither of which were exactly friendly to begin with. And the government is saying this one can transmit through the air.

I should say, other variants also had some ability to transmit via aerosols. That’s not quite a completely new thing, but perhaps it’s more contagious. I guess at this point in time, all we can say is there hasn’t been an international scientific study into the subject yet. It’s undeniable that the Vietnamese caseload is surging, so something quite contagious is in Vietnam right now. And so I guess another way that there’s a risk of a fourth wave.

And speaking to the unfortunate great cost of having had these recent waves, which has just increased the number of infected people and in turn created the petri dishes in which these additional variants have been formed unfortunately.

In terms of the vaccination effort, well vaccination campaigns are continuing and continuing quite briskly. We’re now up to 1.9 billion inoculations conducted globally at this point. It’s about 32 million doses per day. I can’t say the pace is picking up anymore in the major developed countries we look at. We may be starting to bump into demand limits. Some people just aren’t in a rush to get vaccinated,. or don’t plan to be, and some people aren’t eligible at this point in time and it’s actually most visible in the U.S. which is now vaccinating notably more slowly than it was several weeks ago.

It’s been a real deceleration there and it seems to be a demand-side issue as opposed to a supply-side issue. And so it speaks to the challenge of getting to herd immunity. There are real pockets of people who aren’t in a rush to get vaccinated. But on the optimistic side, it suggests that the countries that have been left out or haven’t received many vaccines so far should start to get significantly more shipments as some of the allocations can start to move from the first set of countries into additional countries down the line.

Let’s talk about the economic side now. And so I can say we are continuing to observe April weakness, and this is not a surprise. We know that most countries locked down in April, so there was going to be some economic damage there. Canada’s in that group. For instance, Canada’s retail sales numbers were quite weak for the month of April, as an example.

And then you have the U.S. which didn’t significantly lock down but did experience something of a hangover after the fiscal stimulus that got delivered in March. And so we can see massive jumps in personal income in March, significant declines in personal income in April simply because $1,400 cheques were made one month and not made the month [sic]. And so we are getting a bit of weakness in the April data, but I’ll say as we look at the real-time data that gets beyond that, it seems pretty clear that there was a subsequent economic revival.

We do know that most jurisdictions are now in the business of reopening their economies and we’re going to learn a lot more. In particular, a lot of May data over the remainder of this week, at least as I record this. So we’ll know quite a bit more shortly.

One other trend on the economic side worth sharing is just that economic surprises are not coming quite as reliably positive as they were before. And so really for the last year, practically every data point that came out was better than the pundits had expected. It was a pretty easy and reliable winning strategy and you may have noticed we’ve had pretty persistently above-consensus growth forecast just riding that trend recognizing that was going to be the winning bet most of the time.

That’s becoming less and less true. We’ve seen the surprise indices start to flatten out. It’s not that bad news is dominating. It’s just that it’s more of a balanced situation. And that does speak to our economic forecast.

So we’re no longer as consistently above consensus. We’re now a mix of on consensus or a little bit above consensus. And so not at all a pessimistic standpoint but less convinced that data continues to impress, mainly because data has already impressed so much and expectations are now quite optimistic, to begin with. But nothing really sinister beneath the surface there.

Let’s spend a brief moment just comparing the latest wave of infections to the second wave. So second versus third wave, and I guess the main conclusion is that it looks to us like the third wave has done no more damage than the second wave economically, and conceivably a little bit less.

Definitely less than the U.S. which really never significantly locked down. But even beyond the U.S., we look at various countries and our lockdown index argues that it was not as big of a hit from the perspective of mobility or regulations. And so as a result, there shouldn’t be a bigger economic hit at a minimum. And when we start to look at the data that’s becoming available, and with the caveat that the third wave isn’t quite done, we can say that looking at eurozone services, PMIs are still surprisingly strong. Canada’s fraction of small businesses that are open index shows a retreat but not as bad as the second wave.

Canadian employment has lost, I would say, in the end a similar number of jobs to the losses in the second wave and so it doesn’t look like it was any worse at a minimum. And if the second wave is any guide, there’s then a subsequent substantial rebound which we can look forward to I think in June and beyond.

A few words on globalization. And so much has been made about the collapse of trade during the pandemic. And that is real. And talk about onshoring perhaps reducing trade and Buy American clauses and these sorts of things perhaps doing a permanent hit to trade. It does sound as though trade could be permanently impeded when you add up all those things. People are predicting deglobalization. So reduction in the extent to which the world is interconnected. I’ll just say I’m not fully convinced about that. Ultimately, I think we can see trade growing roughly in line with GDP.

And so that’s not actually technically globalization. Globalization’s when trade outpaces GDP. But neither is it deglobalization which would be trade under-pacing. It’s really more of a stasis kind of situation or sitting on a knife’s edge. And I should say the last decade was already that.

The last decade was already a decade in which trade was growing roughly in line with GDP. And so we can say yes, the era of rapid globalization may be over. That was the late 90s and to a lesser extent the first decade of this millennium. But it’s not really a change happening right now. We think it’s more a change that happened a decade ago.

We are already seeing trade rebound from the pandemic. Trade is always very volatile. It’s now bouncing, as you’d expect, after the worst of the pandemic.

Yes, there are container shipment issues. Yes, there’s port congestion and these kinds of things. But those are probably temporary phenomenon related to the reopening and should be sorted over the next year or so.

And maybe equally importantly, we think there’s plenty of upside, in particular on the services side. And so that’s the area that hasn’t been saturated. There’s still plenty of room for global integration of financial sector and consulting and entertainment and education and tourism and that kind of thing. This is all trade, as well, to the extent these services are going across borders.

And so, I would say not convinced that trade is down for the count. Maybe we’ve lost a little bit of the deflationary influence that globalization offered, and that’s what people are thinking about now.

They’re worried about inflation. And worried that the globalization story could contribute to that in the future. I’m dubious. If there was less deflation from globalization, it started a decade ago. It’s not obviously going to be a new narrative going forward from here.

And then lastly from me, just a few words on geopolitics. And so I guess the big comment is, there’s a lot happening on that front. Of course, you have a relatively new U.S. administration with new foreign policy, and that’s included restoring aid to Palestinians and halting weapon sales to some countries and proposing to rejoin the Iranian nuclear deal and seemingly keeping pressure on China. And now even looking into the origins of COVID-19 in Wuhan, China. So quite a number of different provocations and different sources of friction between the U.S. and China, as an example. And that’s going to remain a focus. In fact, probably the focus.

We know that the U.S. trade ambassador to China is meeting with a deputy premiere of China right now. We also know, by the way, that Chinese demographics have soured quite significantly. The Chinese population is really no longer growing, and China will quite soon be surpassed by India in terms of its population.

And so some demographic challenges that China’s trying to deal with by allowing more children per family. Though, we suspect that’s not the constraint. They already went from a one-child to a two-child policy a few years ago. It really didn’t do much for the fertility rate. But China very much in focus, and frictions there, we suspect.

Quite recently, Israel-Gaza conflict seemingly cooled. Further to the Middle East, negotiations between the U.S. and Iran are conceivably advancing beneath the surface. It sounds as though perhaps a deal may yet be forthcoming.

We’ve seen Russian belligerence and Russian troops until recently at the border of Ukraine. And so quite a lot happening there. And on the developed-world side, Scottish independence dealt a bit of a blow by a recent election that failed to achieve a majority for the party seeking that independence.

So lots happening. I can’t claim that I can wrap it up in a neat and tidy ball. But maybe I can say in the end it’s quite unusual for geopolitical risks to become dominant market themes. That doesn’t happen very often. I can say, as well, when it does happen, it’s usually a fairly short-lived impact.

I won’t deny that the U.S.-China relationship probably is worth watching. That does have the ability to have real consequences for the world and markets. It’s probably also worth watching U.S.-Iran to the extent that any kind of deal might put downward pressure on oil prices. But I wouldn’t say we’re expecting big market impacts from geopolitics in the short run.

Okay. I’ll stop there. Hope you found some of that interesting, and please consider tuning in again next time. Thanks so much.