Genus Weekly In Focus – Addressing COVID-19 Concerns Week-31

Steph Tsui: [00:00:03] Hello, everyone, welcome to this week’s video. Today is October 16th. I am Stephanie Tsui, director of foundations and nonprofits and portfolio manager at Genus. Today we have Mike Thiessen joining us, he is the director of Sustainable Investments at Genus. Can you tell us a bit about what has happened in the markets this week?

Mike Thiessen: [00:00:23] Sure. So this week, the S&P five hundred was was up slightly. So it had a big Monday with a lot of tech companies doing extremely well, especially Apple, which was up about six percent with anticipation of its new iPhones. The presentation that was that happened on Tuesday. But then the rest of the week, the market really kind of drifted downwards there. Concerns about COVID-19 and more cases, the US, more cases in Europe. So that’s really been waiting on the market. And then also there’s the US stimulus bill that has looked kind of troubling throughout this week. There was some positive news last night about some possible positive talks, but throughout the week it wasn’t it wasn’t looking great. But today the market actually did pop up. There was better than expected retail sales in September. So that was quite positive. Pfizer came out with some news around a possible emergency use of its vaccine, possibly even by the end of November. So so that’s quite positive. And the housing sector continues to do really well. So overall market was up slightly, but kind of a roller coaster for the week.

Steph Tsui: [00:01:38] Yeah. Thank you for a round up every week. There are so many things happening. So, yeah. So entering this week, the third quarter earnings season also kicks off. And with major banks reporting earnings this week as well, what have we seen so far in terms of earnings performance that you could share with us?

Mike Thiessen: [00:01:54] So so far earnings have look quite positive. Basically, earnings aren’t as bad as people expected, especially with banks. Banks have been doing bad financials in general. I yes, they’ve been doing very well so far this earnings season. So overall earnings are looking quite positive and we’re feeling optimistic about the rest of the earnings season.

Steph Tsui: [00:02:16] That’s great to know. So have we adjusted of a full year for the rosier than expected earnings in Q3, or have we already positioned for it in a performance earlier?

Mike Thiessen: [00:02:27] So are our signals have been telling us for a few months now to move back into more, more cyclicals, more economically sensitive names, so yes, we have been moving into moving our portfolios to be positioned more for these rosier expectation. We’ve been moving more into consumer discretionary, into industrials, into materials we already had and overweight in technology before that financials, we we used to be more underweight. Now we’re more neutral. So we’ve been doing this over the last few months just because that’s what our signals have been, have been encouraging us to do. And possibly we’ll continue doing that. But but we’ll keep looking at what’s happening in the market, especially coming up to the election.

Steph Tsui: [00:03:09] That’s great to know. Still on the politics front, the US election is still front and center as we have less than three weeks to go until the big election day on November 3rd. So what are some of the things that we should watch for that could potentially move the market? Or do we pretty much expect winchman to moves so the equity market leading up to the big day?

Mike Thiessen: [00:03:30] I think I think the thing that we know is that there’s going to be a lot of volatility. Volatility usually is what happens before elections. But this election, there’s even more uncertainty. This is quite a contested election plus with all of the with covid-19 going on and questions around what’s going to happen with mail in ballots, what different states are doing, how different states are operating differently when it comes to mail in ballots. There’s so much uncertainty and the market really doesn’t like uncertainty. And because of that, we expect a lot of volatility overall. I think that we know that there is going to be volatility and we’ll keep watching the market to see what happens and how we should be adjusting.

Steph Tsui: [00:04:11] Ok, great. And on the Biden victory point, Biden’s focus on clean energy and the sustainable economic recovery, what are the implications for the green and renewable sector? And for example, this year we’ve seen phenomenal growth of green investments, more so than the tech sector rally. Do you think this is more of a long term investors mentality shift or will this rally be reversed if a Biden victory does not happen?

Mike Thiessen: [00:04:37] Yeah, I think that’s that’s a really good question. I think that if Biden does win the election, I think it will be a really long term win for the green sector. I think that will be very positive there for for renewable energy. If Biden wins, he’s wanted to go and launch a green new deal. That would mean that you would be entering the US into the Paris agreement, which means that they have to target zero emissions by 2050.

Mike Thiessen: [00:05:05] And so even though that’s 30 years away, they still need to completely change their energy sector. And that is going to take a lot of a lot of investment. So it means a lot of government funds going into technology that could help them get there, going into a lot of new infrastructure. So that’s going to be a lot of capital moving into the green sector. And of course, Biden wants to rebuild the economy after covid-19. I think if Trump wins, then that I think it will be a short term hit for the green sector. But I think in the long run, the green sector is going to be very positive and will continue the momentum after the short term hit from from from a Trump win. But I think in the long run, it’s beyond the political issue. If you look at many areas of the world, renewable energy is the cheapest source of energy and the rate at which it’s becoming cheaper to have renewable energy is is almost exponential. So I think it’s it’s really an economic issue. And then for investors, they’re looking at what’s happened with with the oil and gas, especially oil this year, the extreme volatility. And a lot of people are wondering if if that’s what they want to have in their portfolio. And beyond that, there’s a lot of predictions whether we could be at the peak consumption of oil right now, given that people are working from home, not not moving, not not driving around as much, not going on trips as much. And people are reconsidering a lot of their values and where they want to be spending their money, where they want to be investing their money.

Mike Thiessen: [00:06:39] And so I think that has really helped with the shift of capital into more sustainable funds, into more impact funds. And I think that that movement is going to continue. So overall, I think that there’s a lot of momentum moving towards the green sector and I don’t really see that changing. Even if Trump does does get back in.

Steph Tsui: [00:07:00] It very encouraging to share that. So thank you so much for your insight. I guess that’s that pretty much wraps up our weekly video today. Thank you for your time. And thank you.

Mike Thiessen: [00:07:12] Thank you.

Steph Tsui: [00:07:13] Thank you. Have a good week.