By Scott Blair
As we slide into summer and enjoy a partial path to normal we can all look forward to nice weather, patios and being with our friends and family without having to do the math on how many people, how many households, what venue are we at. We can hopefully let go of the omnipresent concern whenever we enter an establishment of “I forgot my mask”. The future seems bright, and it is a wonderful feeling.
There is More Good News
As we progress through this pandemic, the equity markets seem to hit new highs almost daily. There is a drive toward normalcy which is welcomed by all. Governments e.g. US and European Union have committed billions to infrastructure projects. Consumers have been pent up at home and as a result saved money which is now waiting to be spent on vacations, restaurants, movies, clothes etc. Sixty percent of Gross Domestic Product is the result of consumer spending. As we move forward and out of COVID, consumers are spending. Low interest rates have helped, particularly for buyers of real estate, in a big way: houses, cottages, condos. We all know that when you buy new real estate, you become a spending machine which fuels the economy. A new house likely means a new bed, washer/dryer, dishwasher, furniture, wastepaper baskets and so on. Somebody must manufacture them, someone has to sell them, someone has to deliver them, and someone has to maintain them. All good for the economy.
In North America, we are not unlike other global economies emerging from COVID. There isn’t a lot of downside and there is still more runway for upside. Of course, there will come a time when inflation will rise, ten year spreads will come in (a negative bond market signal), the VIX (the volatility index) jumps and the yield curve flattens. These will potentially signal less positive times ahead. That time is not now so equities still look very positive. For now, hold the line on equites and when the time comes to be more conservative, take a view of paying down debt and consolidate gains.
In time that will make sense. Again, in our opinion, that time is not yet here. If you’re feeling anxious or simply want to chat, we are happy to discuss.
Photo by Sixteen Miles Out on Unsplash