31 Jul Genus Weekly In Focus – Addressing COVID-19 Concerns Week-20
A vaccine is confirmed and phase three of the trial has begun. It is impossible to ignore the optimism in the markets and winners and losers are now confident of an end.
Jill Bester: [00:00:00] Good afternoon. My name is Jill Bester and I am an associate portfolio manager with Genus Capital. I’ve been with the firm now for two years loving it. And today is July 31st. And I am joined by Mike Thiessen , our head of sustainable investing. Good afternoon, Mike.
Mike Thiessen: [00:00:19] Hi, Jill.
Jill Bester: [00:00:21] Terrific. Well, I hope you’ve had a great day. It’s beautiful over here on the island. Why don’t we start with what’s been happening in the market this week, Mike?
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Mike Thiessen: [00:00:29] Sure, yeah, so this week in the market, first half of the week, we kind of saw a steady climb of the market and then Thursday morning hit and we had the US GDP numbers. So US GDP had fallen. Thirty three percent, which wasn’t as bad as was actually expected, is expected to drop about thirty five percent based on economists forecast. But still, that hit the market quite hard in the morning. But then the market continued to climb after that. So recovering at a most of those losses with it Thursday. And then today we had GDP numbers from Europe. So Europe announced that their GDP for Q2 was down 12 percent and that was actually slightly worse than the down 11 percent that was estimated for Europe. And then, of course, certain countries in Europe didn’t do as well like like Spain or Portugal that are heavily reliant on tourism. And then also this week, there was a lot of news around big technology. There were the antitrust hearings this week and then also a big earnings beat by a lot of these big tech companies. So Facebook and Apple, Amazon all of beat considerably. And so their their stock prices didn’t do well because of that. We cut out companies that have governance issues or have had business ethics types controversies in the past. So actually, a lot of large technology companies are spread out because of that. But we do hold a lot of other technology companies, both of those types of funds, the impact of the fossil free are overweight technology. So those actually did well this week, too, even though they’re not in the kind of the mega cap technology there is still they still did did well based on that news of their earnings beats. So overall, I think it was a good week for for those funds based on technology.
Jill Bester: [00:02:30] Terrific. With the elections coming up later in the year, obviously, and the concerns over the COVID numbers in the U.S., how do we feel about the markets from here? Perhaps maybe out to December.
Mike Thiessen: [00:02:44] Yeah, so I think there are a lot of people right now that are trying to decide if they should be scared of these markets or if they should stick with it, if they should be moving around their asset mix. I think for us, we see that there’s no reason to be really scared based on what’s going on, where you see the markets really decrease,you know, earlier this year and then they bounce back with the V-shape recovery. And there’s been a lot of companies that have been real winners throughout this situation. So technology companies being probably the biggest winners, health care communications doing really well. And then even companies that have been losers in this situation are starting to adapt. So a lot of consumer discretionary companies are starting to change their business models. Others, the markets are really evolving to this new kind of normal type of type of economy. So I think I think we’re probably going to see maybe a second wave. We might see third wave, fourth waves, but as long as we’re able to adapt and continually get better as a society, but also businesses as well, I think that the market would be able to do well throughout throughout the rest of the year. Of course, things can change, but that’s that’s what we believe at the moment.
Jill Bester: [00:04:06] Right. So the exciting news in regards to obviously the phase three trials of some of the vaccine starting to come out this week, I think a lot of people’s minds are getting hopeful and do it hold any of the pharmaceutical companies that are in the trial phase?
Mike Thiessen: [00:04:23] So we don’t hold any of the any of the major ones that are in phase three trials. But I think that if if there was a vaccine that came out, I think it would affect the whole market. I think that there is that big upside on the market right now. If there was some sort of vaccine and I would imagine there will be one, maybe not in the next six months or something like that, but but in the near future, I think that there will be something just because there’s so many companies, so many universities focusing on trying to find a vaccine, that something is likely to come out if we’re trying all these different avenues. And like you said, there’s four different companies that are in phase three. There’s many more in phase two, many more in phase one. So of all of these different trials, I think something will probably work out.
Jill Bester: [00:05:12] Right. That will put my mind at ease for sure. I’m just going to pivot a little bit here. I had a client pose a question this week. And since I had shared that I was meeting with you. The question is, as head of sustainable investment of Genus, can you describe your average day? Tools do you utilize research companies that you hold in our fossil free and impact portfolios? Can you explain how our ESG screens work?
Mike Thiessen: [00:05:40] Sure, yeah, I can do all of that. So sustainability is a really big thing at Genus. It’s a real focus for us where a B corp, where we’re trying to be a force for good in society, which means that I’m involved in many different aspects of the business. The core aspect that I focus on is overseeing our sustainable and fossil free and impact portfolios. But then I’m also involved in working with clients. I do a lot of research. I focus on marketing. I do strategy. So there’s many different areas. But yes, the the core area is looking at portfolios. So so we’re reviewing them every day, making sure that there aren’t any changes that we need to do. And then we’re doing rebalances of these portfolios on an ongoing basis as well. And so in terms of actual actually what we do and we do a rebalance and when we decide which companies to invest in which companies start to invest in, for the fossil free and sustainable portfolios, we we start out with about eighteen hundred different companies. Those are the companies that we actually do analysis on. And then from there we apply our sustainability screen. So we’re applying screens such as screening our controversial industries such as tobacco or weapons or fossil fuels. And then we’re looking at their companies carbon emissions. We’re looking at the controversies within companies. And then that takes us down to an investable universe of about twelve hundred. So eighteen hundred to twelve hundred based on these screens. And from there we’re using our portfolio optimization software to build portfolios and build them while trying to minimize the risk, but also increasing the financial potential that these portfolios have and keeping them diversified. So we’re making sure that we’re diversified across our geographies, sectors, different quantitative factors as well. And then we’re also looking at different tilts that we want to make in the portfolio so we might tilt up a certain sector or tilt down a certain sector, depending on what our overall signals are telling us.
Jill Bester: [00:08:01] Great. Well, I’m sure by my friend Glenn will be happy to hear that news. Well, on that note, again, we’d like to thank our clients for joining us and our prospects as well. We are still growing our business and we’re headed into a long weekend. And I hope everyone has a safe and healthy and happy time with family and friends. Mike, I’m sorry to hear that you have to work on Monday. The U.S. markets open Monday. I’m going to enjoy myself and I’ll be thinking of you Monday, but have a terrific weekend. Thank you.
Mike Thiessen: [00:08:36] Thanks a lot.