May 11-15, 2020

What happened last week

Stock markets cooled as investors weighed the risks of reopening economies

The recent rally across global stock markets stalled and lost some gains, as investors assessed plans to lift lockdowns and reopen economies worldwide.

On Tuesday, the top U.S. infectious disease official, Dr. Anthony Fauci, testified before the Senate Health Committee, stating he was concerned about cities and states reopening ahead of government recommended benchmarks. He warned: “There is a real risk that you will trigger an outbreak that you might not be able to control. In fact, paradoxically it will set you back – not only leading to some suffering and death that could be avoided, but it could even set you back on the road to economic recovery.”

In Canada, the federal and provincial governments took early steps toward reopening segments of the economy. Prime Minister Justin Trudeau announced plans to begin a phased-in opening of national parks and historic sites across the country with enhanced safety measures. Alberta, kicked-off the first phase of its plan and opened retail stores, hair salons, museums, daycares and day camps. Restaurants and cafes reopened at half capacity. Ontario announced it’s set to enter the first stage of reopening this week, including lifting restrictions on retail stores, construction, surgeries, golf driving ranges and tennis courts, and dog grooming.

Fed chairman ruled out negative interest rates to support economic recovery

During a virtual meeting hosted by the Peterson Institute for International Economics, U.S. Federal Reserve (the Fed) chairman Jerome Powell said negative interest-rates weren’t under consideration as a monetary policy tool to support U.S. economic recovery. Some investors were anticipating the Fed might follow other central banks around the world in lowering interest rates into negative territory to spur the economy. U.S. President Donald Trump has indicated his support for such a policy, but Powell pointed to government spending as the right way forward: “The recovery may take some time to gather momentum, and the passage of time can turn liquidity problems into solvency problems…additional fiscal support could be costly, but worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery.”

Bank of Canada review flagged excess levels of personal and business debt

A Bank of Canada review of the financial system warned that excess levels of business and personal debt could weigh down Canadian economic recovery. In the last two months, the bank cut its target interest rate from 1.75% to 0.25% and launched an unprecedented bond-buying program to ease the flow of credit. The review noted these measures have helped ease liquidity strains and access to short-term credit for companies and households, but solvency issues could soon develop if business cash flows and household incomes don't fully recover from the pandemic. In the review, the bank’s governor, Stephen Poloz, said: "We entered this global health crisis with a strong economy and resilient financial system. This will support the recovery, but we know that debt levels are going to rise, so the right combination of economic policies will be important too."

The stock and bond market*
S&P/TSX Composite 14,638.90 -2.19% -14.21%
Dow Jones Industrial Avg. 23,685.42 -2.65% -17.01%
S&P 500 Index 2,863.70 -2.26% -11.36%
NASDAQ Composite 9,014.56 -1.17% 0.47%
MSCI EAFE 1,594.72 -3.26% -21.71%
10-yr GoC Yield 0.54% -0.04% -1.16%
10-yr U.S. Treasury Yield 0.64% -0.05% -1.28%
WTI Crude Oil (US$/bbl) 29.43 18.96% -51.91%
Canadian Dollar US$0.7095 -1.14% -7.85%
Bank of Canada Prime Rate 2.45%

*Weekly performance ending May 15, 2020. Sources:,, and

What’s ahead

Economic reports ahead of U.S. holiday weekend

Wholesale and retail sales, inflation, and housing market data will provide investors with key readings on the Canadian economy. In the U.S., housing, oil inventories, manufacturing and employment reports are also scheduled for release this week.

U.S. stock markets will be closed Monday, May 25, for the Memorial Day holiday.

Key take-away

Focus on the long-term. The investment fund managers we partner with have been through market uncertainty before. They understand the market, are equipped with sound strategies and take an approach that’s designed and proven to outlast market volatility.

Circle these dates

  • June 1: 2019 income-tax filing deadline
  • June 3: Bank of Canada interest-rate announcement

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