Overall my take is that there is a lot of demand waiting to be unleashed through the form of savings and lower debt utilization. This is the tale of two worlds where service and other areas affected by forced shut-downs are suffering horribly while there are other areas where people are still employed, have reduced costs and are banking their money.

Read the rest of the article below to learn about our:

  •  Market Update
  • Economic Developments
  • Alignment: You & Wealth

The rise in bank account cash balances and reductions in lines of credit show this to be true. The lack of regular travel, trips and vacations that people are not spending on also provide a reallocation of capital spending to shore up some consumer balance sheets and boost other areas. People are reinvesting in their homes, buying cottages and other items that support the stay-at-home trend.

I’m not a fortune teller however if I had to guess I would guess that we will see record travel spending in 2022 as much of the world becomes vaccinated against COVID-19.

Much of this is already priced into the market since the market is a forward looking machine. Further gains or losses will come from adjustments to current thinking in the form of new news.

Let’s look at what’s happening economically:

Canadian, U.S., German and Chinese manufacturing is very strong

Retail sales with the strong year over year growth appears to be an unleashing of the fear that caused people to cut expenses and save money early in the crisis.

Inflation is present but not strong. The downtrend in average hourly earnings in Canada point to significant slack in the labour market. Having said that this is likely a bifurcated market with services weakening while others are holding on.

Canadian imports have reached their previous levels of this time last year however exports remain weak. This points to a shift in goods and services that are currently in use versus before. Given that Canada’s larger export products are energy, vehicles and machinery I think this will likely provide a bit of an overhang until we see larger US demand in these categories.

Weakness in Chinese inflation is a concern although it will likely provide some stimulus for their exports. U.S. core inflation last month came in around 1.6% which is well below the 2% target of the Federal Reserve. As indicated by the Fed Chairman Jerome Powell they will keep interest rates low until inflation returns to target and will likely let inflation run above their target for a little while afterwards. No one at this point seems eager to remove economic stimulus.

We remain focused on the US with a cyclical bias. While mega cap tech names have performed very well in 2020, I feel that trade has received much of the upside. I don’t see that as being a likely source of market outperformance in 2021 however I don’t think they’ll fall off a cliff either. The stay-at home trends are here for some time and have changed the way we do business and interact with each other.

Alignment: You & Wealth
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Think about when you were a child and what truly made you happy. If you had those things today would you be happy? What if you designed your retirement around those things?

Such as how social do you want to be? How involved in your community do you want to be? How do you want to be remembered? Then you can design a retirement that is filled with these activities and has the funds to afford that future.

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Until next time,

Trevor Dale, CFA