Market Commentary for August 2020

The momentum in stock prices continued in August as the NASDAQ and S&P 500 hit new all-time highs. Stocks have come a long way from the lows of March 2020, a fact that has many talking heads concerned, warning of a major sell off or another reckoning, siting a disconnect between Wall Street and the real economy. Last month we mentioned the markets bottomed in March and the economy bottomed in April, and the fact that the markets have performed so well is discomforting for some, even though the “Ctrl-Alt-Del” event that occurred in March could be viewed simply as a reset button on the stock market in the midst of a 20-25 year bull market that is being led by the U.S. The reset signals the start of the next wave of growth in the second half of what could eventually be known as the greatest bull market in history. Who knows? One thing we are certain, is that this bull market, which began in 2009, is the most hated and doubted bull market we’ve ever experienced. Brian Belski, BMO Capital Market’s Chief Equity Strategist, likened the momentous rally since March as “wherewithal” pointing out that “it is precisely the resourcefulness of US companies, let alone society itself, to adapt and improvise – a ‘pivot’ that does not easily show up in a quant screen, macro model, or valuation metric.” Brian goes on to say that “bear markets and recessions create despair, and from despair comes hope. Part of the hope with respect to stock market performance is new leaders, new concepts, and new themes…stocks are telling us that a pivot from chaos to coexist is well under way, and investors should act accordingly.”

August brought the full weight of economic data to bear from the second quarter; negative news that was not a surprise, rather it was to be expected. GDP numbers for the spring quarter captured the full force of the lockdown across the advanced economies, and the results put Canada squarely in the middle of the pack. Canada’s GDP fell -11.5% in Q2, roughly in line with Europe’s average of -12.1%. The deepest drops were reported in the U.K. at -20.4%, France -13.8%, and Italy -12.4%. Countries that fared a bit better were Germany -9.7%, the U.S. -9.1% and Japan -7.8%. Thankfully, we anticipate the results for the third quarter will be much more positive as businesses reopened in various stages. In some cases the rebound will be huge, and Canada looks to be one of those cases. It is important to state that in June, GDP snapped back 6.5% and early estimates for July indicate another pop of 5% is to be expected. 

We have included a link below for an interview with Brian Belski featured in the Financial Post. Click on the picture below to watch the interview in full.




To receive our complete Market Commentary for August 2020 or to discuss further, please email us or call 403-296-9086.