Martin Pelletier: How anti-vaccines can infect your investment portfolio


Three things to watch for when assessing the sustainability of the post-COVID recovery

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The stock markets appear to be taking a break as we move from the start to the middle of the cycle in the post-COVID recovery, with market participants trying to figure out what it means and where we are going from there. Many wonder if we’ve seen peak revenue and peak growth, and if the variant’s ramp-up will cause another shutdown.

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You can see this in the moderate reaction to some recent impressive quarterly earnings reports in the US, with high expectations already reflected in stock prices. And then investors hit the panic button on Monday, knocking the S&P 500 and S&P TSX down 3.5% from its recent high, while the Canadian dollar has now lost all of its gains and is now stable on the year.

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During these times, it’s important to remember that markets don’t always go up, and short-term volatility doesn’t necessarily mean that an imminent collapse is on the horizon. For example, did you know that we counted the S&P 500 to have fallen more than two percent eight times this year alone?

However, market corrections are quite common and can actually be quite healthy as they flush out participants at the margin (excuse the pun) without having the means to defend their beliefs over the longer term. In this regard, for the future, three main factors are worth watching, not only with regard to the sustainability of this post-COVID recovery, but also the overreactions to rebalance portfolios.

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The bond market

We continue to believe that this is still a market environment governed by the central bank. Macroeconomic policy will weigh heavily as markets react to indications from the position of the Fed and other central banks. For example, markets corrected over 15% when Bernanke reported a decline in 2010, and some argue that the tech bubble burst when Greenspan indicated hikes would come in early 2000.

That said, this time around, central banks are in dire straits with mounting inflationary pressures offset by the need to keep debt servicing costs low for the massive government budget programs currently being funded by the board. to tickets. In addition, we read that there are a record number of job vacancies, but wages are not high enough to make the unemployed forgo government assistance.

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This is where the bond market can be a good indicator and is worth watching closely, while recognizing that it doesn’t always make the right choices. More recently, long-term (20+) US Treasuries have climbed nearly 12% from their May lows, recouping almost all of their losses since the start of the year. For these overweighted bonds, especially longer-term ones, we wonder if they have a rare second chance?

Oil price

Don’t kid yourself. Despite the plethora of talk around the clean energy transition, high oil prices still have a big impact on the economic recovery in the United States Five of the last six recessions were preceded by a surge in the price of crude oil , with the only exception being the recession in 2020 caused by COVID lockdowns.

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The good news is that WTI oil prices fell from last week’s highs of nearly $ 75.50, down more than 11% to below $ 67 a barrel on Monday. It couldn’t have come at a better time, as Main Street struggles with supply chain shortages causing inflationary pressures on major household products such as food, clothing and gasoline.

Household expenditure & anti-vaccines

We received good news regarding US retail sales last Friday, showing a month-over-month rebound in consumer spending, which is one of the main drivers of GDP growth. People are tired of being locked in and now have had a taste of what it’s like to relive a pre-COVID world. It also appears to be in its early stages, as U.S. households are still sitting on a solid nest egg, having accumulated billions of billions in excess savings during the pandemic.

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  1. Suddenly the mighty EV is our path to salvation.  Yet in the United States, 62 percent of the country's electricity grids run on fossil fuels and are the second largest contributor to GHG emissions with 25 percent.

    Do you want to save the planet? Invest in oil and gas stocks instead of indirectly supporting OPEC and Russia

  2. A recent Abacus Data poll showed that Prime Minister Justin Trudeau could finally get the majority government he so desires.

    Why investors should get their portfolios in order before an election is called

  3. It seems investors have forgotten that return and risk go hand in hand.

    Investors want both high returns and the comfort of security

  4. The US Federal Reserve is extremely limited in its ability to materially raise rates given the massive amount of debt incurred by its government to fight the COVID-19 pandemic, writes Martin Pelletier.

    Martin Pelletier: Investors overlook this main reason the Fed won’t rush a rate hike

Looking ahead, the trillion dollar question, then, is whether the stupidity of those who choose not to get vaccinated is greater than many expect, causing the variant to rise this fall and forcing another lock. We hate to position portfolios around silliness, but it is nonetheless a risk worth watching very closely.

In conclusion, pullbacks are signs of a healthy market and more, as they present a great opportunity to reposition and rebalance portfolios. This can be a pretty difficult thing to do in today’s headline-grabbing environment, but it helps to eliminate noise, have a long-term plan, and deploy some form of active risk management to short term.

Martin Pelletier, CFA, is a portfolio manager at Wellington-Altus Private Counsel Inc. (formerly TriVest Wealth Counsel Ltd.), a private and institutional investment firm specializing in discretionary risk management portfolios, auditing / monitoring Advanced Investments and Taxation and Estate Planning.

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In-depth reporting on The Logic’s innovation economy, presented in partnership with the Financial Post.

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