Genus Weekly In Focus – Addressing COVID-19 Concerns Week-32

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Watch Genus Weekly Video – Week 32 with Mary Lou Miles and Wayne Wachell. With the U.S. elections around the corner, the markets are reacting positively towards a possible Biden win.

This week's questions:

[00:54] : What will a Biden win that seems to be factored in everywhere you’re reading? I mean, for the markets?

[01:44] :  Who does China want to win?

[02:07] : Senate Majority Leader Mitch McConnell, is not supporting President Trump’s stimulus package. Why would he, being a Republicans choose to block it?

[03:24] : What is the implication for Canada’s economy near term? Are we worried about food inflation heading into winter and have we invested heavily in food stocks?

[04:27] Are we seeing the widening of incomes between the rich and the poor? Has it widened significantly since March? How does that potential unrest affect our investment decisions?

Transcript

Mary Lou Miles: [00:00:05] So welcome to our 30 second version of the Genus weekly InFocus covid-19 video for Friday, October the twenty fourth twenty twenty. So my name is Mary Lou Miles and I’m a partner and director of wealth management here at Genus. And once again, I’m here to interview Wayne Wachell, our CEO, co-founder and chief investment officer. So when we had quite a week on the political front for covid-19 the markets and the economy, there’s just so many questions to ask. But definitely elections seem to be the theme this week. So we have one in D.C. tomorrow, potential Canadian federal election that is now on hold. And, of course, the US election is less than two weeks away. Speaking of the U.S. election and reflecting on last night’s presidential debate, which actually turned out to be a debate this time, what will a Biden win that seems to be factored in everywhere you’re reading? I mean, for the markets?

Send us your questions for next week's video

Wayne Wachell: [00:01:00] Well, the market starting to look at a Biden win as the more positive light, and they see whatever happens here in terms of their spending on the covid as taking place after the election. And they see Biden probably spending more than a Trump because he has to deal with the with the Republican senators so they see more stimulus coming in the new year if Biden wins and more money on infrastructure, probably more and more spending generally. So in the short run, the market focuses on the short run rate. So it’s seeing it more as positive than negative. And there’s a hope that the the Biden will attract more to the middle once he is elected as well.

 

[00:01:42] So what what is China does China want to win? Biden or Trump?

 

Wayne Wachell: [00:01:45]  Oh, no. Clearly, Trump has been a thorn in their side. Biden’s more of a globalist he likes to deal with through the institutional to the international institutions like the UN and WTO. So he’ll be, I think, easier for China to deal with. And so he’s definitely seen in a more favorable light.

 

Mary Lou Miles: [00:02:05] Ok. The other thing. Senate Majority Leader Mitch McConnell, is not supporting President Trump’s stimulus package, you know what’s going on here and why would he as a Republicans choose to block it?

 

Wayne Wachell: [00:02:17] Well, number one, he’s Mitch McConnell is a great politician and he can count very well. And he doesn’t have the votes probably. The Republicans are more conservative on the fiscal side, the concern about long term debt and everything else. So in the spending they’re doing now is massive. It’ll be like over four trillion dollars all in if they do the two point two that Nancy Pelosi wants. So compared to 2008, when they it was a big deal that they did eight hundred eight hundred billion. So this is a lot of money going out and they’re concerned about that and how it gets spent. And I think what we’re seeing right now in terms of negotiations, it’s a bunch of posturing and it’s all politics. Pelosi wants to hold out. She has this big number out there. So I think it’s too much. It’s unrealistic. So I think it’s all politics all the way around. Trump’s making like he’ll support it now, but he doesn’t have the votes. It’s all pre-election politics.

 

Mary Lou Miles: [00:03:09] That’s what it appears to be, thanks for that. So now that even BC is joining most of Canada in the second wave of this pandemic, with that, we have the worst daily infection count yesterday at two hundred and seventy four. What is implication for Canada’s economy near term? I also heard this week a term economic nutrition which referring to the move to more local sources of food. Are we worried about food inflation heading into winter and have we invested heavily in food stocks?

 

Wayne Wachell: [00:03:40] Well, we’re not worried about food inflation longer term, I would say. Maybe in the short run, going to get a bump is running right now in the US around four percent year over year. What’s going on, I think, is that we’re seeing new supply chains having being formed. People are going to restaurants anymore, but I think the market in the supply chains are adapting and will continue to adapt. And so longer term, we’re not concerned about this. And the things we hold in the portfolio are names like Tyson and Smucker’s. So that’s why we have people in Europe as well. And McDonald’s, that’s not so much on food services.

 

Mary Lou Miles: [00:04:20] So the beginning of these we started I can’t believe it’s been 30 weeks, but we talked about the divide between Wall Street and Main Street. Now, are we seeing the widening of incomes between the rich and the poor? Has it widened significantly since March? And we know that the long term widening of income started over 10 years ago, not long before the pandemic. But we were concerned about the relevancy based on social unrest. So how does that potential unrest affect our investment decisions?

 

Wayne Wachell: [00:04:50] There has been a widening there’s no doubt about that for two reasons. Number one, the markets have gone up and that’s tied to the class that perhaps shares that are wealthier, obviously, and have capital gains here, as well as the information, the technology sectors that are really well, it’s been the big winner in the space. So that area that we’re where people are very, very educated and have technological skills has done very well. And they’re winning this environment as well, whereas the service sector and some of the other areas are haven’t done as well. I would say the manufacturing area is doing well, is picking up and going to be fine. And as is the construction area, there’s a housing boom, a massive housing boom going on right now. How does this get resolved longer term? Well, of the stock market has to go first. The stock market has to go first before it moves, before the economy starts natural. And there’s a bit that’s going to mean there is an advantage for the people that have capital. The only way that they can catch up longer term, the lower income middle income households is by the unemployment to fall. And we saw that prior to a pandemic, the unemployment rate that got down below four percent, it really had an impact on the lower incomes that their salaries started to go up. And Jay Powell mentioned that about two months ago, and that is their goal. He realizes that both the fiscal spending and monetary policy. Have not been easy enough over the past 10 years, they haven’t and they were concerned about inflation when they got the unemployment rate down to three to four percent. They want to drive it down further now because that’s when they see the lower incomes get a real income gains. And so. They will not be a catch up until the US economy. Jay Powell and the administration get the unemployment rate down back to four percent again, and that’s when the lower income areas really, really catch up and we get more parity.

 

Mary Lou Miles: [00:06:50] Wayne, thank you so much. Always gives us a lot to think about. I think that that concludes our video for this week. Thank you all for watching. Please do reach out to your portfolio manager if you’ve got any questions. And for those of you mutagenic, please click the link on our website. And one of our great team members will get back to you as we head into what looks like a very different Halloween for trick or treaters across the country. We are conscious of the anxiety around all of this for many of our clients and their families and of course, our staff, too. So as Dr. Bonnie Henry, be kind, be calm and be and we’ll see you all next week.

 

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