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To honour late Canadian TV icon Alex Trebek, this episode, Stu Kedwell, Co-Head North American Equities is quizzed on the latest market headlines, from COVID-19 vaccine updates to U.S. election results. [7 minutes, 18 seconds] (Recorded November 12, 2020)


Hello and welcome to The Download. I’m your host, Dave Richardson, and I got a lot of criticism last week; no Stuesdays, no (S)Wednesdays, no (S)Thursdays with Stu. That was my fault. Busy week. Stu was available. And lots of great Canadian news. We’re going to honour a great Canadian, Alex Trebek, who passed earlier this week. I know we were both saddened by that; both Jeopardy fans. So still, I’m going to give you the answer and you can fire off the question. So, U.S. election results, COVID-19 surge around the world, vaccine and treatment announcements?

All right. Those are three good topics. I’ll try to phrase them all in a question. Which three events put together create a lot of volatility in the markets? That’s the best I can do for Jeopardy. I spent too many hours of my life watching that show in university and absolutely love it. So a lot to discuss there, Dave. The current headlines around the COVID case count are certainly a cause for concern. But I think some of the news that we’ve seen on the vaccine front and out of the election, while it won’t trump in — maybe I shouldn’t use that word right off the bat — while it won’t assuage people in the short term, it does give markets the ability to look longer term. And when we see the performance that we saw on Monday and Tuesday, particularly the way the market rotated, it was a glimpse to what could take place in a post-vaccine world. It may be nine months, twelve months, eighteen months before we have this vaccine, but we all know that the long nose of thef market sniffs out the future. And this was something that really allowed investors to broaden what they might think about in their portfolios. You know, just on a personal note, on Monday morning, the vaccine announcement came out of Pfizer that the data looked quite good relative to what had been expected. And immediately I got a text from my golf group saying, should we look at a golf vacation next week? And that’s a great little analogy about how people could immediately broaden their horizons about what they might think about in their portfolio. So that was probably the biggest news. Then on the election front, I would expect that to likely continue to be a little bumpy in the next couple of months. Certainly, again, the data would suggest, pretty convincingly, that it will be President Biden and that the government will be part Democrat, part Republican. We’ll see what happens in Georgia in January, but again, probably, a fairly measured response. I think markets took a lot of comfort from Biden’s speech on Saturday night when he talked about reaching across the aisle and really trying to compromise to solve some of the issues that are at hand. So that was a positive. Then, to your earlier point, you’re watching the case count and what’s gone on in Europe, in pockets in the United States, and Ontario. That’s certainly a concern from the near term. But in an environment where central banks are providing a lot of liquidity and we’ve shown a bit of a glimpse towards the future. It does provide the opportunity for markets to look all of a sudden to a post-vaccine world.

Do you think Stu that this increases or decreases the chance of more government action, particularly in the US — and we’ve talked about this in previous weeks —, where there’s been such a struggle to get some additional stimulus passed?

It might make it a little bit more of a challenge, particularly because the economy is not doing too badly, all things considering. A pathway to stimulus was very important when you were uncertain around the vaccine. So, from a market standpoint, you might sit there and say, well, stimulus may not be quite as robust as we’d hoped for a month ago, but now we have the potential for a more effective vaccine. So I think one equals the other. You know, there are so many businesses out there. We’ve talked a lot about the businesses that are growing through and through, but there’s a whole swath of the economy where they’re either not generating a lot of cash flow because their businesses are under pressure or even, they’re burning cash flow to keep their business afloat. So the idea that that period of time can be shortened, and drive the cash burn down, that’s quite positive from a longer-term standpoint. Whether or not it’s an airline — Air Canada was burning nine million dollars a day — if you think that might not happen for three months versus your prior expectation, that’s a lot of money. It’s a lot of money for Air Canada and it might save off any further equity issuance or something like that. So that can be quite a positive. When you think about a bank and you’ve taken these provisions for credit, it gives you comfort that the provisions probably are more than adequate. We already were thinking that anyways. But all of a sudden you can start talking about this time next year, could there be the release of a few provisions and will the banks be able to buy back stock when we get to this time next year? So that’s what I mean in terms of broadening your investment horizon or broadening what you’ll think about in your portfolio, because envisioning some degree of normal is a little bit easier once we had that vaccine news.

Golly gee Stu, that’s a great analysis of those stocks and what’s going on! That’s my really poor imitation of another great Canadian who passed this week. I loved him growing up, Howie Meeker.

That’s right. I look forward to when you can draw on the screen. Howie was the first to do that I think

He was fantastic. Well, Stu, you’re always fantastic. I think what we should do next time is catch up on dividends and dividend stocks, a big picture on that, because I know that interests a lot of Canadian income investors. But good to catch up on a really eventful couple of weeks, so we’ll be back with you next week.

OK. Thanks for having me, Dave.


Recorded November 12, 2020

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