Sept. 21-25, 2020
What happened last week
Markets remained volatile as investor uncertainty continued
North American stock markets lost ground for a fourth-straight week, as political and economic risks – heightened by tensions around the approaching U.S. presidential election – continued to give investors reason to pause. The Nasdaq was the exception, gaining through the week on the strength of "stay at home" stocks such as Peloton and Zoom. The price of oil remained under pressure with the ongoing rise in COVID-19 cases worldwide fueling investor concern over future demand for the commodity. And gold prices, which tend to rise as governments spend to spur on their economies, sank to a two-month low as further stimulus spending by the U.S. government seemed in doubt.
Calls for further fiscal stimulus to boost U.S. economic recovery intensified
With the U.S. presidential election six weeks away, partisan politics prohibited lawmakers from reaching a consensus on additional financial aid for the struggling U.S. economic recovery. In testimony before Congress on Tuesday, U.S. Federal Reserve Chair Jerome Powell lent his voice to those urging further support from the U.S. government: “The path forward will depend on keeping the virus under control, and on policy actions taken at all levels of government.” He added that while a recovery is underway, “both employment and overall economic activity, however, remain well below their pre-pandemic levels, and the path ahead continues to be highly uncertain.” On Thursday, Nancy Pelosi, the Speaker of the House of Representatives, spoke with U.S. Treasury Secretary Steven Mnuchin and expressed hope for another round of negotiations on a relief package. This news contributed to a small rebound in U.S. stock markets.
Canada’s government pledged to do “whatever it takes” to support the economy
On Wednesday, Canada’s Liberal government outlined its priorities for a new session of Parliament in a much-anticipated throne speech, followed by a nationally televised address by Prime Minister Justin Trudeau. The Prime Minister promised the government will do “whatever it takes” to help Canadians and businesses through the pandemic, and laid out a list of longer-term policy plans, including a national childcare program, pharmacare, improving senior care and increased spending on housing and the environment. While the plan was light on details, the government signalled it’s intention to continue expanding its already sizable debt. Given its minority position in parliament, the government will need support for the plan from at least one opposition party, otherwise a federal election may be required. As of Friday, it appeared likely the Liberals would find support from the New Democratic Party.
The stock and bond market*
|Dow Jones Industrial Avg.
|S&P 500 Index
| 10-yr GoC Yield
|10-yr U.S. Treasury Yield
|WTI Crude Oil (US$/bbl)
|Bank of Canada Prime Rate 2.45%
*Weekly performance ending September 25, 2020. Sources: www.bloomberg.com, www.bankofcanada.ca and www.treasury.gov.
Economic data: Key releases this week include a report from Statistics Canada on Gross Domestic Product in July, and the U.S. Department of Labor’s monthly unemployment claims update.
Circle these dates
- Oct. 12: Canadian markets closed for Thanksgiving holiday
- Oct. 19: Bank of Canada “business and consumer” survey results released
- Oct. 28: Bank of Canada interest-rate announcement and monetary-policy report
- Nov. 3: U.S. presidential election
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