The first quarter of 2021 brought us an anniversary although it’s one we would rather not celebrate. COVID-19 and the baggage associated has been around long enough. According to the Canadian Healthcare Network, the date of the first documented case in Canada was January 25th, 2020.
Market action for the quarter saw a gain in most of the indexes. TSX Composite up 7.2%, S&P + 5.8%, QQQ + 2.78% Dow Jones up 7.76%. Under the hood, a battle emerged that is still being fought with the “Stay at home” versus the “Reopening” trade. This is also to a great extent “Value vs Growth”. Many of the growth companies that surged higher are now consolidating their 2020 advances.
There is much talk about the pulling forward of future trends into the mainstream by years if not a decade. One example is Telecommuting. Zoom anyone? Many of these companies had stellar runs in 2020. However, not to be left out of the party and aided by the rapid development of vaccines, the traditional participants in the economy have slowly been gaining ground. Many are close to (some above) pre-pandemic levels. People will and do want to move around, visit loved ones and go out for dinner.
A recent scapegoat for market volatility has been the tick up in interest rates. The rise in the US 10-year treasury from mid-single digits to the recent high of 1.76% has given many a reason for pause. As we all know, most governments have opened the monetary floodgates as a response to anything COVID. This brings back memories of inflation and higher rates for all old enough to remember. At some point higher rates paid on fixed income become a competitor for equities. The current climate doesn't make it too appetizing to stray too far from our current allocations.
It’s interesting to note that with all the money printing, gold has moved down 9.26%. With bitcoin up 100%, it makes one take note. Is gold now the “Old man’s bitcoin”? No doubt some speculative money that would find a home in the precious metal has now changed its’ address to digital.
We await with anticipation for our first budget in two years from Ottawa. Will we see a reckoning for some of the recent spending? The consensus is …not yet. Rumors of increasing the capital gains inclusion rate seem to be the most popular, although in the future.
2021 is now well underway and we hope an end to the pandemic and all things related comes soon enough. A quote from Professor Richard Feynman comes to mind:
“Good days give happiness, bad days give experiences, worst days give lessons, and best days give memories”
As we enter the second quarter, we continue to wish you and yours all the best in health, safety and prosperity.
Source for Market Data Thompson One and S&P