Q1 started with Omicron, the COVID-19 variant being front and center: countries around the world re-imposed lockdowns and travel restrictions. Not sure anyone was “ready” for another wave and being under restrictions again, but as the French say … “c’est la vie”. While working from home continued for most of us, it was far from boring for bond portfolio managers: it was like watching the greatest bond movie in history unfold.
Yes, Omicron has landed, but in COVID-19 form. Just as we thought the Delta variant would be our focus, another variant emerged – Omicron. Markets not only reacted to the surge in COVID-19 cases this quarter, but also to the surge in inflation around the world and what central banks are going to do about it.
The first 2.5 months of the quarter were lackluster for the most part as markets moved quietly and slowly in a positive direction. Maybe most people just wanted to enjoy summer and not worry or even think about the markets. As summer started to wind down, unfortunately Covid-19 did not: cases started to spike again. Also, by mid September investors woke up and found reasons to focus their attention on lingering issues that would teeter the markets: the US debt ceiling expiration and the ability of one of China’s largest real estate developers, Evergrande Group, to pay some hefty interest payments on their debt obligations.
Covid-19 fatigue is real. There has been so much conflicting news, that people have just started tuning out. For instance, to mask or not to mask: CDC is suggesting that no masks are required for fully vaccinated individuals, but yet WHO is still suggesting that a mask should still be worn for fully vaccinated individuals for better prevention again the Delta variant . Even in Canada, there has been some flip flopping regarding the use of the AstraZeneca vaccine about its safety and more recently, the push to mix and match vaccines in an attempt to push for herd immunity. Who can follow all of this and what is believable? Well, the one thing that is positive is Canada has made great progress in vaccinations over the last quarter! Whether or not it’s the right step forward on their methods, vaccinations have accelerated during the quarter with 67% of the Canadian population receiving 1 dose and 31% of our population now being fully vaccinated. Provinces are staggering re-opening over the coming weeks with targets of being fully operational by the fall. Vaccinations do seem to be working in terms of limiting the severity of Covid-19
(and variant) symptoms, reducing hospitalizations and increasing the confidence of society to be more active.
“Are we there yet?” It’s been more than one year since much of our society started working from home. Clearly, life is still not “normal” and it is very unclear what the “new normal” will look like or when we can say the pandemic is behind us. Everyone’s patience has been tested and is still being tested. Vaccination in Canada is rolling out at an embarrassing snail’s pace compared to other countries. As warmer weather approaches for Canada, provincial governments are concerned that it will lure people to venture outside more and gather socially. New variants are on the rise and we are seeing evidence in the positive test numbers that yet another wave is developing. I’m losing count which wave this is, as life has not changed much over the last 12 months for me, everything is pretty “boring” and routinely the same.
The long awaited summer came and went in a flash as another quarter flew by. Q3 was a bit more trial and error as the reopening of the economy (restaurants/stores/offices) was phased-in with caution in Canada. Covid-19 cases remained low at the start of the quarter but started to spike again as the quarter came to an end.
The Canadian government continues to be supportive to ensure citizens will be able to endure these times of hardships. While there was optimism that people were returning to work and the unemployment rate looked to be declining from the heights of the pandemic, Canada is funding its way through the pandemic with debt. The province of Quebec announced a one-month lockdown for October towards the end of the quarter, setting alarms that this pandemic is definitely here to stay and drawing concerns that other provinces will follow.
Heading into the start of the quarter, for the first time in anyone’s living memory, the world was forced to shut down and hibernate (or “social distance”) due to the threat of COVID-19. While countries and cities around the world slowly reopened throughout the quarter, most of the quarter seemed like a blur- people woke up confused about what day it was, where they were working and how or where to shop. Many had assumed back in February that we would be “done with this virus” post the normal flu season but, here we are entering Q3 still trying to understand it and get ahead of the battle to “flatten the curve”.
As we started the new decade, traders all over the world had a new bounce to their step – no confidence could be shaken as we ended 2019 stronger than ever with optimism.
Then, rumblings of a “flu” broke out in China. The severity seemed so far away (only one province in China was impacted). By the end of January, China announced its plans to start strict quarantines and shut down factories after Chinese new year (early February).
Google search defines intention as “an aim or plan” and (in medicine) “the healing process of a wound.”
The latter is rather befitting given how 2018 ended: anyone who participated in the markets in 2018 was pretty badly beaten up that December. Almost every asset class lost money in 2018. Healing from those 2018 battle wounds was going to take time as everyone knows that even with the most determined patients, there could be challenges along the way. Thankfully, we saw progress in 2019.
“Fed” Up with the Volatility?
As the days go by, it feels like weeks have passed – only because they are so jammed packed with news. These are the days of our lives (yes – it does feel like a soap opera). Intraday moves feel more violent. Like the chart on the left vs. the chart on the right below. What happened on those days?