Weekly Market Comment: July 17, 2020

Science, don’t fail us now

Our favourite news this week may have been Moderna’s 45 patient early stage human trial that successfully produced antibodies in all test subjects. But caution is warranted, as their vaccine produced low t-cell responses (calling into question its durability) and there was no data for older people. It will also require a second dose.

In contracts, the Oxford covid-19 vaccine trial backed by AstraZeneca is generating both antibodies and t-cell responses that researchers want to see. This twin effect is very encouraging to see and the larger phase 3 trial set to happen in Brazil is still needed to prove efficacy. But production is still realistic for as early as September. Did we mention that this exciting project is being led by a female scientist? Awesome.

In the meantime, Walmart has joined Costco and Apple in requiring facemasks in all of their stores while Ontario has mandated them province wide. More will likely follow.

Slow is ok if you don’t stop

According to the Bank of Canada, Canada’s economy will take two years to fully recover from what it described as the “steepest and deepest” economic drop since the 1930s. They cited a strong economic rise of the lockdown bottom but it will take time to work through the economy’s excess capacity and all the uncertainty.

In the U.S., the outlook isn’t as rosy. For example, the Philadelphia Fed’s Patrick Harker said he sees a slow and uncertain recovery due to their troubling coronavirus trends of late. His call is for a “[Nike] Swoosh, written with a very shaky hand”.

One bright spot is China, which reported a Q2 GDP gain of 3.2% over a year ago. They were first in with covid-19 and more likely to be first out.

Debt as high as the CN Tower

The world’s debt.

Our friend and colleague Ryan Lewenza tabulated some interesting stats around Canada’s projected $343 billion deficit this year. This number is six times larger than the previous annual record in 2009 which was $60 billion. Since 1968 (the year Pierre Trudeau became PM), their two governments are on pace to have seen 55% of Canada’s total $1 trillion debt (in red below). Economic cycles are bigger than political governments, as are pandemics. But one thing is for sure: the days of Canadian fiscal surpluses (mostly under Chretien and Martin) are long gone.

chart of federal deficits 

Robinhood is a fairytale, either way

It is often claimed that Robinhood is moving markets but the numbers suggest otherwise. Is it? The popular online stock-trading app Robinhood has attracted a staggering 13 million users and is especially popular with young people. According to JMP Securities, the average account size typically ranges between $1,000 and $5,000. Using the high end of this range would suggest $65 billion of collective client assets.

The collective value of the S&P 500 alone is about $28 trillion. That’s the equivalent of almost 431 Robinhoods.

Of course, that is not to say their investors can’t move certain stocks. Robinhood investors tend to pile in to stocks that other Robinhood investors are piling in to. The top 100 holdings at Robinhood suggests a strong penchant for flashy, famous companies that tend to have sky-high valuations. Throw in margin leverage and, for some stocks, their influence can indeed be outsized.

Noteworthy links:

Musings Beyond The Markets

The B.C. government maintains an excellent Covid-19 dashboard that is updated every day at 5pm. Viewers can look at results province wide or by region.

As of Thursday, BC had 15 covid hospitalizations, three of whom were in ICU. There were 21 new reported covid cases. Of the 3,170 total cases to date, 53% were in the Fraser Valley (which stretches from Burnaby to Manning Park). Source.

virus cases chart 

If you click on the “International Comparison” link in the center, you’ll see how BC stacks up relative to other countries on a per 1 million population basis:

Cumulative historic cases:

cumulative historic cases 

Daily cases:

daily virus cases