Genus Weekly In Focus – Addressing COVID-19 Concerns Week-26

Thomas Irwin: [00:00:02] Welcome, everybody, to the Genus weekly InFocus video. This is the twenty sixth edition of this video, which is a milestone recognizing that we have been doing this now for six months. It’s hard to believe we’re six months down the line from this and so much has happened in such a short amount of time, Wayne. And yet it feels like we’ve been dealing with it for quite a while now. My name is Thomas Irwin. I’m an associate portfolio manager here at Genus and I’m celebrating my two year anniversary just last week.

Thomas Irwin: [00:00:34] And with me is our CEO and chief investment officer, Wayne Wachell. Hi, Wayne.

Wayne Wachell: [00:00:39] Hi.

Thomas Irwin: [00:00:42] Today is Friday, September the 11th, and I’d be remiss if I didn’t say that it’s been 19 years, the day since the attacks at the World Trade Center. We’ll talk more about that. I’ve got a question for you related to that. But I want to first talk about the week that was in the markets. Volatility has returned starting late last week. We’ve seen sort of a seven percent, at least in the S&P, seven percent from the high last week to the low this week. And it’s kind of been bouncing around a little bit. What are your thoughts around around this volatility and what sort of precipitated that?

Wayne Wachell: [00:01:22] Well, first off, we’re in the season that week, part of the year in late August, September time period. So you normally get some weakness in September. What happened over the past week really was just the tech sector basically taking a bit of a break and it got way ahead of itself that ran up. It was like 15 percent ahead of the 50 day moving average. Twenty five ahead of the 200 day moving average. It needed a bit of a rest. It’s getting it right now. And so it’s coming back down to earth here with a bit of a correction, a drag them down some of the other stocks as well. But that was the area that concentrated was big. Those big FANG names are all off around 10, 12 percent. So it’s a correction I think much needed.

Thomas Irwin: [00:02:06] Yeah. Now ahead of this last week of volatility or as a result of it, have we made any changes in the portfolios?

Wayne Wachell: [00:02:14] Well, you know, in our August rebalance, we took some equity money off the table, not a lot. We took some off and put them into some of the credit product, into the corporate bonds and high yield bonds. As well, in our rebalance as we’ve been shaving, technology’s been doing so well. It’s been shaving, even shaving our semiconductor rates, which say like every month for the past two months, we’ve been shaving semiconductors and we did some more of that as well. And we need some more of that even after the correction here. So just getting the portfolio more diversified into some of the more beat up value areas are economic sensitive areas and moving money from from tech into those areas.

Thomas Irwin: [00:02:50] And back to 9/11. That event is obviously an event that everybody remembers where they were when it happened. Here we are 19 years later, and while it’s not a one singular, focused event, it’s certainly going to be a time that everybody remembers for the rest of their life. And I just wondered, what if you look back over the years of the firm, what has Genus learned implemented? How have they sort of helped clients navigate through these difficult times?

Wayne Wachell: [00:03:24] Yeah, we have you know, we’ve always had a quantitative modelling based approach, and we’ve always been improving that over the years with better technology and just better ideas and expanding our degree of modelling. And I know during the 2008 crisis, we said prior to that we are focused primarily on stock selection. We weren’t making any kind of big sector moves or asset makeshifts. We just said we have to do more macro type research and modelling. And we started doing that building our our our dynamic’s platform to do more macro modelling. And we’ve been doing doing that. And through the course of the past, you know, since the Great Great Recession, our team has been focusing on some new areas in terms of looking at style and style rotation. And as you know, as you’re aware, that value has been underperforming now for years and growth has been there. Do a lot of work on that, even pre the crisis and going into the crisis. We’re doing some work on the economic sensitivity of stocks and being able to distinguish good value stocks and sort of bad value stocks predicated on their economic sensitivity. And that work we did really helped us during the past six months in terms of what stocks to avoid and where stocks go into. And so I think having a better understanding of how the macro environment impacts our stocks is going to help us going forward. I think if you’re a manager, you don’t understand that you’re going to get hurt.

Thomas Irwin: [00:04:53] I know it’s one of the big reasons I joined Genus. And I know I talked to some clients who really liked that part of what we do, and that’s a reason why they’re there with us.

Thomas Irwin: [00:05:02] Let’s shift to the the COVID, the pandemic. Kids are back to school this week. Some of them and I know that has a lot of parents, teachers, the kids themselves with anxiety. If you just kind of look forward a bit. And this is kind of the event that we’ve all been waiting for over the summer. What happens in the fall when when kids go back to school, the weather turns and flu season ramps up again? What do we see as a potential risk to to what’s happening right now on that front?

Wayne Wachell: [00:05:32] Well, we’ve seen conflicting research on this on the school school event, and most recent I’ve seen is that your kids aren’t super spreaders. That’s that’s good news. I think there will be individual outbreaks. They’ll have to shut those schools down or I’m freezing for a couple of weeks. And I think we have to find our own way and adapt and change, and I think we can do this. And I think the market is saying, too, that we can actually adapt and work our way through this this issue. And I would say one thing in terms of there’s a lot of concern about a flu season coming up. Well, if people adhere to social distancing and masking and everything else, that’s going to help mitigate the regular flu season, something we’ve never done in the past. Right. So it’s going to have an effect on both the flu and the COVID . So I think it’s we can do this is what I’m saying.

Thomas Irwin: [00:06:21] Yeah, I know Dr. Bonnie Henry has come out and said that they wouldn’t this very likely to be a sort of a wide shutdown of schools, that they would maybe shut down pods if there was outbreaks or a particular school, but not a province wide kind of thing. And similar to the economic front, we’re probably not likely to see a global shutdown again of economies and whatnot. I had a client ask me this week actually is now a time to invest with everything that’s happening, pandemic related socially.

Wayne Wachell: [00:06:59] Well, there’s always things to worry about, you know, that, and the old saying is the market climbs a wall of worry. And so, you know what else is new? But there’s been massive changes that we’ve seen over the past six months and more coming as we go to this new era. I would say typically my advice in terms of investing right now, we’re in the season pretty weak right now. And I’d say hold back, invest, maybe put some of your money into the market right now and then wait to get through the season one week period through the end of October. And you might want to wait till post-election time for the for the rest. I would say just in terms of will there be a surprise, will Biden when we don’t we’re not really sure what his agenda is. So I would say start going in overtime, but you can put some in now. I’d say we had a bit of a correction, put some in now and then. Wait, I would say wait. Through the six week period and post election I’d, I’d get invested the predicated on what we see in that period there.

Thomas Irwin: [00:07:54] Thank you. So in closing, I’d like to thank our CEO, Wayne Wachell. Thank you, Wayne. I’d also like to thank our clients for their trust and their continued business. I’d also like to thank our prospective clients for taking the time to watch our videos and be curious about Genus and consider possibly hiring us. Lastly, if you have any questions about this video or you wish to review your portfolio, please contact your portfolio manager. Thank you for watching and enjoy your weekend.