Managed Portfolios – Quarterly Rebalancing Commentary June 2020

The S&P/TSX Total Return Index ended the month of June up 2.46%, marking its best quarter in more than a decade (Toronto Star). Investors were focused on the speed of economic recovery from the Covid-19 crisis rather than the lagging economic data showing record temporary declines. Market sentiment also continued to thrive for a third consecutive month in June, as the new COVID-19 infections in Canada were not accompanied by as many hospitalizations and deaths. In terms of monetary policy, the Bank of Canada held its interest rate steady at 0.25% (Bank of Canada) and gave no intention of raising rates given the current economic circumstances created by the pandemic. From an economic perspective, Canada’s GDP declined by 11.6% in April, its worst monthly drop on record (Global News).

In the US, 4.8 million jobs were gained after the loss of an unprecedented 22 million jobs throughout March and April (USA Today). Currently, personal incomes are being assisted by stimulus checks and benefits, set to expire at the end of July. If such benefits are not maintained, several unemployed Americans will face a substantial decrease of revenue in the second half of 2020. From a health perspective, Dr. Anthony Fauci said there is no guarantee the U.S. will have an effective Covid-19 vaccine, warns spread ‘could get very bad’ (National Post). Currently, the US is on pace to surpass 100,000 new infections per day if the outbreak continues at its current pace (CNBC).

Overseas, infection rates have dropped to low levels, prompting economies to reopen in Europe, Australia, and parts of Asia, including China. Recent infections have also decreased in the United Kingdom, but not as much as in Europe.  Political tensions between China and other parts of the world are increasing as China did not warn of the coronavirus pandemic earlier and did not fully disclose the extent of its outbreak. Beijing is also receiving pressure for “eroding the freedom of Hong Kong” (Hong Kong Free Press) by imposing new security laws. In Europe, the EU’s response proposal to help more severely impacted nations, such as Italy and Spain, suggests a step towards fiscal union.

As always, I welcome any questions you may have regarding the above.