Market Update - February 2021

With RRSP season behind us and tax season approaching, we reflect back on February’s market performance and our expectation for what the next few months could look like.


Despite an increase in volatility at the end of the month, February proved favourable for risky assets. Global equities increased their lead over the bond markets, which are showing losses year to date (chart below).




This reflects, in part, a marked improvement in the fight against coronavirus, just in time for its first “anniversary” since the WHO formally categorized its spread as a global pandemic. The number of new cases per day in developed countries has fallen sharply since their peak on January 11th (see chart below).




…while the global vaccination program continues to gain momentum (chart below).




Israeli data shows an 85% efficacy rate 15 to 18 days after the first dose of Pfizer’s vaccine – a figure that increases to 95% after the second dose. In addition, not only has the number of hospitalizations dropped by about half from its peak, but the average age of patients has dropped significantly as well (chart below).




These Israeli numbers provide optimism that while COVID-19 will remain an issue throughout the year, its scope will diminish as immunization of the most-at-risk population reduces the pressure on health care systems. Uncertainty associated with variants remains, but there are reasons to believe that a turning point should be reached by summer, if it has not already occurred.


With the light at the end of the COVID-19 tunnel approaching, it is no surprise that market attention is increasingly turning to what awaits us beyond the health crisis. Factoring in the magnitude of upcoming fiscal spending (the U.S. congress just passed a $1.9 trillion plan) the bond market is starting to factor in higher interest rates. Accordingly, 10-year U.S. Treasury yields spiked back up to near ‘pre-pandemic’ levels – sending bond prices down significantly (chart below).




While rates were naturally expected to increase as the pandemic wound to a close, the speed in which the turnaround happened took the market by surprise. It seems inflation fears drove this latest rate uptick (as can be seen in the chart below). But while inflation is always a concern – we do not expect the level to increase much further beyond the current 2.0% - 2.5% mark (which has been firmly established since the early 2000’s). Global central banks continue to suggest that rates will remain low for quite sometime to accommodate higher unemployment and a post-pandemic economic rebound.




Putting inflation fears aside, a marked rebound in economic growth is on the horizon. Emerging market economies (led by China) have surpassed pre-pandemic levels of industrial production and are entering a new expansion Advanced economies shouldn’t be too far behind.

Real personal income (supported by government stimulus) grew by almost 5% last year (chart below) - shocking during a recession.




Household savings rates are at nearly 15% (chart below), a level we haven’t seen since the early 1980s!




All of this is to suggest that a spending boom may be on the horizon, and that corporate earnings could continue to surge upwards though 2023 (chart below). So while we remain ever cautious about what could be ‘next,’ it is hard not to be optimistic about the investment potential of the months ahead.





As always, please feel free to reach out to any of our team members to discuss any question you have regarding you investments.


-The Creed Capital Team




PS: With the housing market heating up, we are getting a lot of questions with regards to financing. I thought it prudent to pass along National Bank’s current mortgage rates for anyone who is interested.


Example rates for a 90 day rate guarantee on a $500,000 mortgage on a principal residence based on 25 year amortization:


One year fixed: 2.19%

Two year fixed: 1.74%

Three year fixed: 1.74%

Four year fixed: 1.79%

Five year fixed: 1.84%


Five year variable: P – 1.15% (effectively 1.30%)


Disclaimer: These rates are as of today and subject to change at any time and are for information-only. Rates are not guaranteed until an application has been submitted to the bank for approval.






















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