Provinces across Canada begin the process of opening the economy. We’ve also relaxed some of the social measures designed to keep COVID-19 under control. The US is ahead of us with many States opening up more sectors and businesses. Are we entering the other side in the battle against SARS-CoV-2? Or are we just getting a small taste of the new normal? Will the economic restart be a walk in the park? The virus will attempt to surge as we attempt that economic restart. Let’s begin the dance.
It’s the May 24 (Victoria Day) Weekend in most of Canada. For our friends in Quebec it’s the National Patriotes Day (Journée nationale des patriotes).
Many more businesses were granted permission to open. In Ontario where I live, we are now ‘allowed’ more interaction but in smaller group settings. Of course, we are to maintain that social distancing and practice common sense.
For now we have the virus under control. Most Provinces have planked COVID-19 to an even greater degree compared to Ontario. Quebec and mostly the Greater Montreal area still faces the greatest challenge.
It is party time in Ontario.
I went for a very long (and very nice) bike ride yesterday. I have never seen so many folks on the Rouge Beach walking path along the lake. It was even busier as I moved into Pickering and Ajax and towards Whitby and it was impossible to practice that 6 feet of social distancing. It was obvious that many were congregating outside of their immediate families.
I toured around and could spot many backyard parties and many front yard or driveway get togethers. You could see that there was the effort to practice social distancing. Of course Canadians relish the warm weather. We’ve been cooped up much of the Winter and then the pandemic piled on with the added need to shelter in place. It’s only natural that we’d be out in full force.
But what we might do to help the cause is wear masks when we know that we will be in tight quarters and in the moments of unavoidable close contact. This, from a Globe and Mail article …
Epidemiologists, immunologists, other doctors and researchers are touting the benefits of masks. A research paper published last month by scientists from Cambridge and University College London, among other research centres, concluded that “without masking, lifting lockdown after nine weeks while keeping social distancing measures will risk a major second wave of the epidemic in 4-5 months’ time.”
An open letter signed this week by 100 scientists and health authorities from around the world said that “requiring fabric mask use in public places could be amongst the most powerful tools to stop the community spread of COVID-19.”
Wear a mask don’t be a party pooper.
Yes, we have to keep practicing the common sense measures. Do your best to keep apart and keep some masks handy. Each Province is obviously monitoring behaviour and new case rates. With any meaningful spike they might shut the whole thing down and cancel Summer. Respect the virus. Remember, it is out there in even greater numbers.
COVID would love to crash your parties.
Support your local businesses.
It will be more than difficult for many businesses to move back to profitability. Quite frankly there are so many businesses and sub sectors that will not survive. That is all part of the new normal. But do your best to support local businesses. Typically, consumers will hunker down and become prolific savers after an economic shock. That’s normal and expected as many are wondering if their job is safe. They wonder if they will get called back to work. Uncertainly breeds caution. For those of you that can afford to spend wisely – spend wisely.
We know from evidence in Asia and the US, that you can open up stores but that does not guarantee that folks will shop.
Here’s a chart that shows some of the hardest hit business categories.
Those are US studies, but it’s reasonable to expect similar patterns and behaviour in Canada.
The good news is the economy is getting shellacked.
Yes that’s also the bad news. But because the economy has already taken such a beating in the first and second quarter, it should not be difficult to generate ‘growth’ in the third and fourth quarters. Much of the firing and furloughing is done. The business sectors that are allowed to restart are hiring or bringing back their workforce. If we are able to manage the economic restart, more businesses will open in stages. That will beget additional hiring and economic activity.
I’m so proud of our kids who both found work. My son sent off an application and was hired ‘on the spot’ with no interview. “Come on in, we need you”. He’s working long days. The garden centre has long line ups, up to 2 hours. Folks are spending. One customer spent over $1,100 yesterday, that got the attention of the staff.
My daughter is about to begin laboratory work creating pharmaceutical ingredients, required due to additional needs brought on by the virus. We are so proud.
Of course against the backdrop of businesses openings will be business closures. There will not be enough income for many businesses to survive. We hear of many clubs and restaurants that are packing it in. Many more will fight and fail. It is a long list of sub sectors that face this fight in the new normal. That said, most economists suggest that we will see economic growth in the third quarter.
Let’s not mess this up. Be smart out there to help control the spread of the virus. Let’s keep our businesses open. We have to do this economic restart right from the beginning. We cannot afford to start and stop.
Gradual economic recovery?
I would agree with most economists that the economic recovery will be gradual and slow. There are simply too many headwinds. We have a cautious and scared consumer in concert with cautious business owners. There are supply chain issues. And more importantly we have to do this slowly and with caution. The virus remains the elephant in the room, likely for many years.
And unfortunately some business types are shut down for the near future, or for good. Think sports and entertainment (stadiums) and cinemas and more. Some sub sectors will not come back in full. Again, that is the new normal.
Slow and consistent economic growth would be a roaring success. And that might provide a floor for the stock and bond markets. Those markets are also supported with the promise of endless government help. That said, it’s reasonable to expect much more volatility in the stock markets in the months and years ahead.
Stocks for the optimist. Bonds and gold for the pessimist.
We hold Canadian bonds and US Treasuries. And as I offered in last week’s post I have started positions in Gold, Franco-Nevada and Bitcoin. I don’t necessarily trust the stock and bond markets or the virus. I fear that the historic money creation needed to support businesses and individuals will create its own issues down the road.
But I’m hopeful that we’ll start the recovery process. I hope we get this economic restart right. I’m just not going to bet the (worker-less, supply chain challenged, where’d-my-restaurant-customers-go?) farm on it.
This article in the Financial Post suggests that the big Canadian banks are well prepared for all that the COVID years can throw at them. From that article, that’s also the opinion of the Bank of Canada analysts. It might all depend on how many years ‘yer talking’.
And if you want some optimism for what might fuel another outrageous stock market run, from Scott Barlow in the Globe –
Yes, we might be getting ahead of ourselves there. But hey, anything can happen. This is the stock market that we’re talking about . The theme is that bonds suck so bad that there’s nowhere else to go. TINA. We’ll see.
In MoneySense financial help for students and recent grads affected by COVID-19.
On myownadvisor Mark Seed looks into the US Dividend Aristocrats.
Jonathan Chevreau asks should seniors take the 25% RRIF reduction in 2020?
On eatsleepbreathefi Chrissy is coming out!
On savvvynewcanadians, a look at the savings accounts at Scotiabank. Yes it’s slim pickings. As Enoch points out, you’re better off going to EQ or Tangerine or another online bank. You might be best served to utilize GICs as much as possible. Savings account rates have been decimated.
Mike The Dividend Guy offers his April Dividend report.
Rob at passivedividendincome is back with some thoughts and his buy watch list. That would be three of my US holdings 😉
Here’s the April report from Dividend Athelete.
It’s not all dividend cuts.
On the same theme, and once again, we’ll check in with All About The Dividends for increase #15 of 2o2o courtesy of Algonquin Power. Gotta keep the lights on.
GenYMoney wonders, should you borrow money to invest in a bear market?
I’m not surprised to find those/my US long term treasuries at the top of the list.
And we’ll leave the last word to Melinda and Bill Gates. Their message to the Class of 2020 in these very trying times.
So, what does all of this mean for the next chapter of your lives? As a member of our global community, your actions can have a global impact. Whatever your professional goals, wherever you live, whoever you are, there are ways, big and small, that you can participate in making the world better for everyone.
Be like Melinda and Bill, perhaps.
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Enjoy the rest of your weekend.
Be safe. Be smart. Respect the virus.