January 29, 2021

Quarterly Bulletin - Winter 2021

A year filled with hope!

After a historic year dominated by the COVID-19 pandemic and its negative impacts on the world's population and economy, 2021 brings some long-awaited hope with promises of vaccines and economic recovery.

2020 was an emotionally charged year. Stock markets experienced multiple ups and downs due to the pandemic, which left personal and economic damage in its wake. The gap between the real economy and the highs of global stock markets continues to fuel fears. Should we be worried about a market downturn like in 2020? We don't believe so! Fiscal stimulus and monetary easing are injecting enormous amounts of cash into the economy and should yield the expected positive results. Manufacturing, construction, mining, forestry and some retail and household goods sectors will continue to benefit from this massive deployment of liquidity. Conspicuously absent from this economic upswing is the service sector (including food services, culture, travel, aviation and traditional retail), which will unfortunately have to wait for better health conditions.

The stock markets continue to anticipate strong growth in corporate profits for the coming year, along with successful vaccine measures, continued expansionism and a rebound in activity comparable to the roaring twenties after the Spanish flu. With this promise of a brighter future, the major US stock markets recently hit record highs. Many worry that Wall Street is getting ahead of itself and may eventually see about a 10-percentage-point pullback. This could happen with the advent of bad news (low job creation rate, impacts of the COVID-19 variants, slower than expected economic rebound), in which case recovery plans would need to be deployed more quickly.

Last year, the Fed announced it would now be targeting an average inflation rate of 2%. We should become accustomed to the notion that key rates will remain unchanged in 2021 and perhaps even in 2022! This has helped spur the rush to residential real estate, just as lockdowns increased Canadian and American savings rates considerably in 2020.

The question is simple: six to twelve months from now, will the economic climate be more positive than it is today? We believe so, but we must still be careful not to count our chickens too soon! If we are proven wrong, it will be because the pandemic will have overtaken our collective efforts to curb its spread!

Change finally came to Washington last November. The election provided a dramatic finale to the reality TV series that has divided the United States over the past four years and that ended in an insurrection against democracy on Capitol Hill. Joe Biden faces the daunting task of uniting two hostile sides together in a single nation. Wall Street also heard the inaugural speech of the President. A unifying leader, Biden spoke directly to Americans, asking them to take up the cause of previous generations: building a better world, today and for the future.