Genus Weekly In Focus – Addressing COVID-19 Concerns Week-19

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As COVID-19 continues to affect the U.S, countries around the world are getting ready for the 2021 economy by offering stimulus for companies and citizens. Debt is a certainty, but is that a bad thing?


Grant Conroy: [00:00:01] Welcome, everybody, to the Genus weekly video, this is week 19 and being the 19th, it made me realize just how long we’ve been in this now. I believe the first one of these just on in March, March or twenty first. So it’s been a while. For those that don’t know me. My name is Graham Conroy. I’m a portfolio manager with Genus. I’ve been here for just over four years now. And joining me today is the returning Justin Hahm, who is Genus’ Market and Macro Research Analyst. Welcome, Justin.

Justin Hahn: [00:00:32] Hey everyone thanks.

Grant Conroy: [00:00:34] So getting right into it, the markets this week seem to have been slightly down for the week and just wondered what has been driving them.

Justin Hahn: [00:00:45] So this week was actually a very interesting week, the markets started off very positive on some of the earnings coming out, which met or beat some of the expectations, as well as some positive news on the fiscal front from Canada, US and Europe. But it was only until a couple of days ago where markets started turning down due to some of the increased tensions between the US and China.

Grant Conroy: [00:01:13] Now, that’s interesting, the S&P has hit a new high on Wednesday, I think. The the tensions between the US and China seem to have been simmering for a while. We had all the trade talks at the end of twenty nineteen. How do we view the tensions now and their impact on the markets?

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    Justin Hahn: [00:01:33] Yeah, so looking at some of the tensions and what happened this week between the two nations was some of the consulates being banned in both the US and China. U.S starting in Houston, banning some of the US consulates and shutting it down, as well as China reacting to that and retaliating today, shutting down the consulate, the US consulate in Chengdu. So although this is something that we’re looking at and watching closely, we don’t think it’s going to have too big of a market impact yet. The China trade deal with the US, China still seems to be holding up on their end, with soybean purchases hitting new all time highs between the US and China, as well as other commitments. China is actually holding up on their end. And so it’s more of a political front at this point with China and U.S, but we’ll be watching it going forward.

    Grant Conroy: [00:02:26] Right. I guess it’s there’s always worrying news out there for the markets. It seems, as always, something to focus on. Jumping back to the earnings front, you mentioned earnings starting this week and I realize that’s around the world. But ea rnings have been reported for the second quarter for companies. What have we seen so far? I guess we’ve covered impact. It’s very different to normal.

    Justin Hahn: [00:02:50] Yeah, so earnings this week for this quarter, there are too many companies that have reported, but some of the bigger companies have reported a lot better or meting  expectations at least, which is very positive for the market and proves why the market was really strong doing starting this week as well as last week with a positive impact from earnings. In the US, I believe it was about seventy five percent of the companies that have reported have either met or beaten expectations of analysts, as well as Europe showing a lot bigger positives coming out from that region with a lot of the COVID impacts happening earlier. So they were able to quarantine and shut down a lot earlier and.

    Grant Conroy: [00:03:32] Right. Thank you. And I guess the expectations were quite tempered coming into this as well. I guess estimates have been lowered and it’s probably important to identify that earnings are going to be down year on year for most companies. But they’re actually if they’re better than what people were expecting, that’s obviously a good thing they weren’t hit as hard. So sometimes I guess stocks might react positively, even though the numbers look bad on a given year basis just to meet the expectations. Also noticed that there was a lot more rumblings this week around extending the government stimulus both in Canada and around the world. What are your thoughts on that?

    Justin Hahn: [00:04:13] So a lot of stimulus has been positive on the news front and all the regions, starting with Canada. Canada announced an extension of their CERP benefits to for COVID impacts with by a couple of months I believe. The US has been floating around about another one to two trillion dollar stimulus package aimed at either direct checks again or maybe a payroll tax cuts. The details are still fuzzy, but I believe that they plan to have some kind of result or some kind of framework, at least by next week. And the big news this week was actually coming out of Europe. When I was first on this InFocus piece with Leslie, I believe we mentioned that the European Union had finally agreed on an agreement for COVID relief fund that was back almost two months ago. But now, after two months, they finally signed it and fully agreed after taking out some of the details, start ironing out some of the details, as well as getting all the countries to agree.

    Grant Conroy: [00:05:19] Right, and that’s similar to the other countries, to Canada and the US, where are supporting citizens around Europe, I guess.

    Justin Hahn: [00:05:27] Yeah, so this they build this relief package as a CORONA because a COVID relief package, I believe, and it’s targeted at one of the more sorry, some of the more harder hit countries such as Italy and Spain. And it seems to be valued at about seven hundred and fifty billion euros. So it’s quite a big stimulus package, which we’ve seen happen in Canada, us all around the world.

    Grant Conroy: [00:05:51] And I also noticed this week that the S&P ratings agency reaffirmed Canada’s triple-A rating, which obviously, given all the debt that’s been issued, is encouraging. And I believe one of the rationale that they gave all the reasons was that they expect the stimulus to actually help Canada achieve more growth next year coming out of this. So whilst it’s a lot of debt that being issued, it’s not always necessarily a bad thing if it helps economies like guess. Well, thank you very much for that, Justin. It seems that the markets and the news flow is starting to incorporate a little bit more than just COVID in terms of the earnings coming out, which is encouraging on this path of getting out of the crisis. I would encourage everyone watching if you have questions to reach out to your PMS on the video or anything else. Always happy to try and help. So thank you for watching and have a great weekend.

    Justin Hahn: [00:06:46] Thanks, everyone.

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