The delayed stimulus package, plus the cooling of technology stocks combined with increased COVID cases, results in a market correction. Watch Wayne Wachell and Jill Bester on Genus Weekly Video – Week 28.
This week's questions:
[00:25] : Nancy and Donald are seem to have issues getting together and moving forward with the well advertised stimulus package in the U.S. It feels as though it’s on hold. And I’m wondering if this delay is created, the 10 percent drop we’ve seen on the market this week?
[01:25] : Has the Fed stated objective of supporting the corporate bonds help during this time, in your opinion?
[02:18] : Tell us how our new global bond fund is helping clients during this time. It is denominated in US dollars.
[03:37] : How is Genus prepared if key people are or become ill during this time? And what is our process around that issue?
Jill Bester: [00:00:01] Good afternoon. My name is Jill Bestor and I am an associate portfolio manager with Genus Capital. Today, I’m joined by Wayne Wachell, our chief investment officer and our CEO. Today is Friday, September twenty fifth, and this is our twenty eight Genus weekly video. It’s amazing how time has gone by.
Jill Bester: [00:00:21] Well, Wayne there was a lot of news this week, Nancy and Donald are seem to have issues getting together and moving forward with the well advertised stimulus package in the U.S. It feels as though it’s on hold. And I’m wondering if this delay is created, the 10 percent drop we’ve seen on the market this week?
Wayne Wachell: [00:00:43] I think it’s been a part of the part of the correction. There’s been a couple of other factors. I would say tech simply got too far ahead of itself and needed a bit of a breather. It got hit hard last week, came back this week somewhat. As well, we’re seeing rising covid cases in Europe, which is a concern. There’s talk of UK shutdowns. Those those three things have really driven the correction over the over this period here and also the seasonality as well. It’s just it’s that silly time of the year when markets seem to come off and almost threw that into. Hopefully we’ll get a rally into the election.
Jill Bester: [00:01:17] Right. And this current risk off environment is favouring safer government bonds than corporates, but not by much has the Fed stated objective of supporting the corporate bonds help during this time, in your opinion?
Wayne Wachell: [00:01:31] Oh, absolutely. They really hammered corporate spreads down. Number one, we had a massive rally in government bonds and yields have dropped dramatically. And when that initially happened, spreads between corporates and governments was blown out. And the central banks of this pounded those down. And and they’re really managing that segment. It’s really being controlled by the central banks of both Canada and the US, for example. So and they’re still there. They’re not going to go away. They told us, I’m not going to go away. They’re going to be here for a long time. So it’s providing support to that. And it’s really allowing companies that have lower ratings to to restore their balance sheets. They can issue should get good rates. That helps them set up. Those people survived the pandemic over the next year or two.
Jill Bester: [00:02:16] Right, right. Right. Tell us how our new global bond fund is helping clients during this time. It is denominated in US dollars.
Wayne Wachell: [00:02:24] So US dollars, it’s been fighting a bit of a headwind here. But you know what? We think the Canadian dollars, we’ve had a nice run here. We think it’s getting a little toppy, it’s hitting some resistance and we think we’re going to maybe in the beginning start of a bit of an intermediate rally in the US dollar. And I think because of that, we’ve taken some gold off the table as well. But I think that’s going to help the our macro bond strategy over the next month or two. How big of a deal? We will have a tailwind report now. And you’re still getting good, excellent yields in in that portfolio. We have exposure to the to emerging market debt. We have exposure to corporate bonds in the US and high yield. They’ll have very good yields versus what you can get in the government bond of around half per cent right now. So it’s just a good place to park fixed income money. And also we have the central bank standing behind all those different bonds.
Jill Bester: [00:03:20] Right. We’ve had this question in the past, Wayne, with the COVID numbers increasing and the announcement by the prime minister after the throne speech this week that we are now actually in the second wave of the virus, the client post this question is how is Genus prepared if key people are or become ill during this time? And what is our process around that issue?
Wayne Wachell: [00:03:48] Well, we’re using all the guidance from the province in terms of how we run our business and most of our we have a team of around 35 people and maybe in a given day we might have between five and seven that sat in the office sort of distance distancing very well. I think the senior members of the firm and older members of the firm are definitely isolated and being very cautious and distancing and Maskey and everything else. So, you know, we’ve have we haven’t had really issues, any issues so far. So in our process, we have a we have we partner with the outside manager that helps us. They’re a big operation. We have processes and and and disciplines and a lot of technology to help us. So if someone went down, individual went down, I think we still keep on running the way we always have. We have enough bench strength, I would say, in our firm.
Jill Bester: [00:04:49] Right. I’m curious now which part of that demographic would fall under? Well, perhaps we should wrap this up for another week. On behalf of the Genus team. We’d like to thank our clients and our prospects. If you have any questions. We really, really do like to hear from you. So reach out to your portfolio manager. I hope you have a terrific weekend, Wayne, and we will see you again next week.
Wayne Wachell: [00:05:19] You too.
