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TPA draws on this week’s presentation by Benjamin Tal, Economist at CIBC, to describe what is in front of us for the 4th quarter of 2020 and the 1st quarter of 2021.

In an hour-long presentation, Tal explained that the U.S. has performed much better economically than the rest of the world because of the decisions it made when faced with the trade-off between “lives and livelihood.” Throughout the pandemic, the U.S. has remained more open than most countries and, as a result, has the worst health record. The U.S. also has a lower level of economic devastation as a combination of fewer restrictions and huge economic stimulus reduced the economic damage.

He further described the recovery as 2 recoveries “a V-shaped recovery for two-thirds of the economy” and an “L-shaped recovery” for the services sector. A V-shape and an L-shape is actually the K-shaped recovery that TPA discussed on 9/8 in the World Snapshot entitled “WHAT A K-SHAPED RECOVERY MEANS FOR INVESTORS.”

Tal went on to say that small businesses have been hit the worst and larger companies. Like AMZN, actually benefitted from the situation.

Tal concludes that the 4th quarter of 2020 and the 1st quarter of 2021 could be a problem in the U.S. for several reasons:

  1. VACCINE DELAY After hundreds of conversations with the medical community, the consensus forecast for a safe and effective vaccine and widespread delivery in Spring 2021. That means over 6 months more without a vaccine.

  2. VACCINE ACCEPTANCE? Once there is a vaccine, the question will be how many people will be willing to get the vaccine.

  3. END TO STIMULUS Much of what has sustained the U.S. consumer during Covid-19 has been stimulus in the form of direct payments and beefed-up unemployment. Tal does not see any new stimulus until, at least, after the election due to politics and disagreement over the possible negative effect of additional unemployment payments. (This was discussed on 4/27 in the World Snapshot entitled “CARES MAY ACTUALLY DELAY THE RECOVERY”.)

  4. DEPENDENCE The stimulus payments are mostly gone as it can be shown that most of the payments went for essentials to keep people afloat. Without these payments, these people will be in even more dire circumstances.

  5. HISTORIC PANDEMIC PATTERNS The pattern of Covid-19 versus the Spanish Flu shows that another wave is likely and that it will overlap with the normal Flu season.

TPA will use some of CIBC charts to follow this logic below.

The chart below shows that the U.S. less restrictive measures resulted in more daily infections per million than other western economies.

The U.S. deaths per 100,00 people and change in GDP is an outlier versus the rest of the world. The U.S. as sacrificed health for economics.

The recovery in durable and non-durable goods versus services shows the lopsided V and L recovery; the K recovery.

Unlike other recessions personal income rose because of injected money in the U.S. however….

…consumer income expectations and confidence are once again falling as stimulus ends and the money runs out.

Finally, the pattern of Covid-19 is very similar to the pattern for the Spanish Flu in the UK. This points to the probability of another wave that will overlap with the regular Flu season.


ALWAYS REMEMBER: No strategy exists in a vacuum – always evaluate the relevant sector & market. Over 80% of portfolio performance is determined by sector and market forces (Ibbotson & Kaplan study – January/Febuary2000)

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