Monday morning briefing – Reverse swoosh

Speculation became reality when Canada lost its AAA-rating from Fitch Ratings last week. Fitch dropped Canada’s rating to AA+. This was largely in response to Canada’s rising debt-to-GDP ratio, which ballooned as the government initiated spending programs to help Canadians amid the COVID-19 pandemic. This could raise the cost of capital for Canada, hinder investor confidence and slow government spending. This is a downgrade from only one of three of the major rating agencies. Canada is not the only G7 country to have a credit rating of less than AAA. The impact may be minimal, but only time will tell.

Economic/industry news

U.S. GDP contracted 5.0% in the first quarter: U.S. GDP fell at a 5% rate in the first quarter, and the worse is likely on the way

Weak consumer demand could weigh on Canada’s recovery: What’s dragging down the Canadian economy as the world reopens?

Canada’s credit rating downgraded: Canada loses AAA rating, Fitch downgrades amid virus costs

IMF predicts the global economy to be worse than it projected: IMF expects global economy to shrink by 4.9% this year

Benefit from following rebalancing rules: Rebalancing rules bolster long-term performance in market stress

Commercial vacancies could rise in 2020: Working from home, shopping online weaken demand for office space

Reasons for hope

Moderna CEO bullish on company’s vaccine: Moderna CEO sees ‘high probability’ of success with COVID-19 vaccine

Surviving two pandemics: Meet the 101-year-old who was born on a ship during the 1918 flu pandemic and just beat coronavirus

Helping people avoid touching their faces: Teen invents wristband that could curb infection by warning users against touching their face

Millennials are saving more: Pandemic lockdown provides silver lining for millennials

Adapting your business

Some budgeting tips for your business, post-pandemic: Adapting your business budget after coronavirus: 5 tips to get back on track

Helping clients stay focused on their goals: What advisors can learn from investor behaviour during a crisis

Dynasty Financial Partners and its network are creatively engaging with clients: Dynasty’s pivot to virtual events

Planning for the next crisis: Preparing family offices for the next global crisis

Chart of the week

Headline retail sales figures have shown the substantial impact COVID-19 has had on the retail sector, particularly in clothing and apparel. Nike Inc. serves as a good proxy as to how bad conditions have been. The sports apparel, accessories, shoes and equipment behemoth announced it had revenue of US$6.3 billion in its 2020 fiscal fourth quarter ending May 31, 2020. This is a 38% year-over-year decline, the companies’ first year-over-year drop since the 2008-2009 financial crisis. The closure of stores around the world weighed on sales.

On the other hand, the company had a 75% increase in online sales in its fourth quarter. As economies reopen, spending should increase. But, how much of the increased spending will be put toward sporting apparel and equipment? Let us know what you think.
Used with permission of Bloomberg Finance L.P.

News and notes (U.S.)

Market conditions could be beneficial for market neutral funds: Tide may be turning for market neutral hedge funds

It could be a long recovery, according to Bridgewater: Bridgewater’s Bob Prince says virus impact could last two years

Investment in PE isn’t going away: PE has failed to outperform stocks, research says, but LPs aren’t turning away

Introducing the Direxion Work From Home ETF: The ‘work-from-home’ ETF is here. Get ready for some surprises.

Making it easier for virtual currency firms to get a license in New York: New York to relax cryptocurrency rules

News and notes (Canada)

Looking to maintain tech changes: Pandemic-era tech changes should become permanent, says Toronto Mayor

Mark Wiseman will take over as Chair of AIMCo: AIMCo needs a savior. Mark Wiseman needs a comeback after BlackRock.

Assets under management of Canadian mutual funds rose to $1.6 trillion in May: Canadian fund sales swung back to safety in May

Companies engaged in developing tech for the health care and education industries attracting VC dollars during pandemic: How COVID-19 is impacting Canadian VC investment

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