notebook with coins, pen and calculator.

July 2020 Newsletter

“Science is the great antidote to the poison of enthusiasm and superstition.”
Adam Smith

Bounce Back Quarter

The first quarter of 2020 brought a level of anxiety to equity and bond markets not seen since the financial crisis. As economies entered lockdown, aggregate demand fell off a cliff. However, governments and central banks acted quickly to limit the economic damage with unprecedented fiscal and monetary stimulus. In the US, Congress enacted a fiscal rescue package totaling US$2.8 trillion with unprecedented speed, earmarking trillions for the unemployed and small businesses. Similarly, the US Federal Reserve (Fed) announced an open-ended quantitative easing program and several other programs to provide additional liquidity for market participants. This resulted in a significant expansion in its balance sheet of over US$3 trillion. The Fed’s actions helped to reduce the cost of borrowing for corporations and individuals, the lifeblood that keeps the economy growing. Combined, these measures amount to ~20% of US GDP, but the US was not alone in announcing stimulus measures; global fiscal measures equaled 6% of world GDP. The response to COVID-19 has far surpassed the measures taken during the financial crisis and, when combined with the monetary stimulus, these actions have largely been responsible for the significant rebound in both equity and bond markets. Like our global counterparts, Canada also embarked on its own economic bailout package in an effort to keep the economy from slipping into a deep depression. Canada’s federal COVID-19 stimulus package has included spending more than $150 billion to help stabilize the economy, split between direct support to individuals and businesses. However, according to the parliamentary budget officer, the total federal deficit will reach approximately $252.1 billion this fiscal year. Relative to the size of the Canadian economy, the deficit would be 12.7% of GDP and the federal debt-to-GDP ratio would rise to 48.4% of GDP in 2020- 21. The larger deficits prompted credit-rating agency Fitch to downgrade Canada from a perfect AAA to a near-perfect AA+. Despite the decision, the other rating agencies maintained Canada’s existing AAA rating and the reaction to the downgrade was limited, as the 10-year bond yield remained unchanged on the day of the announcement.

While these measures limited the downside in the economy, both the US and Canada experienced a severe contraction. In Q1, US and Canadian GDP contracted at an annual rate of 5.0% and 8.2%, respectively; the unemployment rate shot up to 13.3% (in the US) and 12.8% (in Canada), putting millions of individuals out of work. The most severe impact from COVID-19 will be evident in Q2 GDP data released later this month. Nonetheless, as some normalcy returned in late Q2, economic growth began to rebound from very depressed levels. Still, the US recovery has been complicated due to rising COVID-19 cases across some 20 US states. Fifteen states have paused or rolled back their re-opening plans, covering ~40% of the US population.

The stimulus measures have provided a bridge for the economy while it recovers, but there remains uncertainty surrounding when the economy can fully reopen and support a robust recovery. The earliest both the US and Canadian economy may return to the previous level of GDP is 2022/23. In the meantime, governments and central banks will be encouraged to maintain ultra-accommodative fiscal and monetary policies until the economy fully recovers and/or acceptable levels of employment are achieved. Unfortunately, this crisis has further exacerbated income inequality, as there are segments of the population that have experienced job loss and/or face the prospects of an imminent loss of income once government support winds down, while other segments are flush with cash, having experienced a forced rise in savings. This involuntary savings may negatively impact future consumption levels once the initial pent-up demand subsides, as individuals may decide to increase precautionary savings driven by fear of future outbreaks and the economic disruption they would create. Of course, with short-term interest rates near zero, this presents a host of challenges for savers and often pushes them into riskier assets such as equities.



Economic Recession/Recovery by Country

notebook with coins, pen and calculator.

The COVID-19 pandemic has triggered unprecedented market uncertainty around the world.  As restrictions begin to ease, we are beginning to see trends of economic recession/recovery across the globe.  Below outlines the predicted shape of recovery and summary notes across countries/regions.

U.S:  U-shaped or a square root-shaped      

  • We expect a U-shaped or a square root-shaped recovery.
  • Uncertainty about the path of the virus and stimulus effectiveness lead to four broad recession/recovery scenarios.
  • Neither economic data nor financial markets are signaling yet an end to the recession.

Eurozone:  U-Shaped

  • Early signs of flattening in the COVID-19 curve and partial easing of lockdowns provide hope for the eurozone economy.
  • With unprecedented monetary and fiscal support, break up risk remains subdued.
  • But expect a U-shaped recovery at best, as downside risks remain elevated.

U.K.:  U-shaped or W-shaped

  • The spread of COVID and lockdowns have led to an abrupt stop in the economy.
  • We anticipate a U-shaped recovery in the U.K.
  • But the possibility of a W-shaped recovery increases if Brexit negotiations aren’t extended.

Japan:  Square root-shaped

  • Japan’s COVID outbreak has so far been less severe than other parts of the developed world.
  • But social distancing still points to economic collapse, which is partly offset by massive stimulus.
  • We expect a square root-shaped recovery as long-term structural problems persist.

China:  Square root-shaped

  • China’s quick economic rebound from COVID-19 is corroborated by a broad array of data.
  • But pronounced stimulus has been lacking, the recovery is lopsided, and long-term problems remain in place.
  • This suggests that the recovery is likely to be square root-shaped.

Source: Ned Davis Research


Charts of Interest  

The consumer confidence upside surprise sent the Citi Economic Surprise Index to a new record


Robinhood users holding shares of bankrupt firms



Another importance difference between now and 2008/2009 is that consumers’ balance sheets are currently extremely strong (net worth minus debt) vs. going into ’08 consumers were already overextended

The S&P has become extremely concentrated


Flushed with Cash

Grappling with the most economic uncertainty in decades and a head-spinning stretch of volatility in the U.S. stock market, many investors have rushed into money-market funds.  Assets in the funds swelled to about $4.6 trillion, the highest level on record, according from data from Refinitiv Lipper going back to 1992.



Featured Team Member: Amalia Kilofliski

Amalia Kilofliski. 

With more than 10 years of practical experience with Raymond James and other leading firms in the financial services industry, Amalia shines at bringing her creative and insightful perspective to guide the business development and marketing expertise of the Cadence Financial Group.

Amalia’s experience and accreditations have provided her with a deep understanding of various business development strategies. She has refined her natural talent for event management, team building, and sales-and-marketing from coordinating many past projects. As a former business owner, Amalia, who is both incisive and compassionate, fully understands the level of commitment required to build a successful enterprise, and encourages and supports each person on the Cadence team to achieve our stated objectives confidently and precisely!

Fluent in Romanian, Amalia’s academic background includes earning a BA (Hons) degree in economics from the Academy of Economical Studies in Bucharest, Romania, and an MBA from Simon Fraser University. She is also U.S. licensed.

Although Amalia has a passion for her work, family is what is most important to her. She loves being a mom, and her beautiful daughter, Alexandra, is the light of her life. Indeed, Amalia’s favourite moments in the day are those she spends with her husband, Catalin, and daughter Alexandra. With a genuine love for travel, Amalia has visited more than 20 countries so far, with plans to visit many more. You can reach her directly at Amalia.Kilofliski@raymondjames.ca.


Post COVID Investment Trends




Since the pandemic has started, our society has experienced changes with how we carry on with our everyday lives with a high degree of uncertainty. Despite the greater uncertainty for investors as to what this new normal looks like, one outcome of this pandemic that is certain is the acceleration of several investment trends.

For example, one investment trend that has accelerated since the pandemic started is sustainable investing that focuses on factors such as environmental, social and governance or ESG as it is commonly called. In the past investors were more focused on the “E” or environmental-think renewable energy.

With the recent social movements investors who want to ensure a profitable investment must consider the social or “S” in ESG as companies are being increasingly scrutinized by their stakeholders.

Other investment themes to consider include: AI, gold, cloud computing, health care, and e-commerce. 

Before deciding what investment ideas make sense for you, it is important to have a solid investment strategy in place to do so otherwise in my opinion is just speculating. 



A friendly reminder that tax payments are due by September 1st.  Enjoy the summer using the government’s money for a change.


This newsletter has been prepared by Seth Allen and expresses the opinions of the authors and not necessarily those of Raymond James Ltd. (RJL). Statistics, factual data and other information are from sources RJL believes to be reliable but their accuracy cannot be guaranteed. It is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. This newsletter is intended for distribution only in those jurisdictions where RJL and the author are registered. Securities-related products and services are offered through Raymond James Ltd., member-Canadian Investor Protection Fund. Insurance products and services are offered through Raymond James Financial Planning Ltd., which is not a member-Canadian Investor Protection Fund.  This provides links to other Internet sites for the convenience of users. Raymond James Ltd. is not responsible for the availability or content of these external sites, nor does Raymond James Ltd endorse, warrant or guarantee the products, services or information described or offered at these other Internet sites. Users cannot assume that the external sites will abide by the same privacy policy which Raymond James Ltd adheres to.