COVID-19 has wreaked havoc on the world economy, which is set to contract the most since WWII this year as governments shut down large segments of their economies to slow the spread of the virus. There are some signs of recovery as the latest data from the CPB Netherlands Bureau for September showed that real world trade in goods was just 1.5% below its December 2019 level. Confidence in the timeliness and effectiveness of a Covid-19 vaccine has contributed to confidence that we can return to a kind of ‘New Normal’. The success of this will depend on finding an acceptable trade-off between public health, the economy, and personal freedom.

China was likely the only major economy to grow in 2020, as it had more time to recover from the coronavirus hit. Structural weaknesses in China’s economy (demographics, rising debt burdens, and diminishing returns on investment) are currently being papered over with stimulus. The Chinese economy is tilted towards goods production and less on services, also benefiting GDP.

The ECB has just expanded its pandemic emergency purchase program (PEPP) by €500 billion to a total of €1,850 billion and extended the horizon to at least the end of March 2022.1 The United Kingdom will begin 2021 with a fresh start on trade and will freely negotiate trade agreements on its own. In January, the EU’s Common External Tariff will be replaced with the U.K. Global Tariff, which will apply to imported goods from countries without an existing trade agreement.

In December, the U.S. Federal Reserve decided to maintain the target range for the federal funds rate at 0.00% to 0.25%.2 The Fed will continue to increase its holdings of Treasury securities by at least US$80B per month and of agency mortgage-backed securities by at least US$40B per month until further progress has been made toward the Fed’s maximum employment and price stability goals. Retail sales were down 1.1% in November, after falling 0.1% in October and gaining 1.7% in September.3 Regional manufacturing indexes decreased in December. Housing starts rose 1.2% in November after gaining 6.3% in October.4 The number of Americans filing for unemployment benefits decreased to 803,000 in the week ended December 19th, from the previous week’s three-month high of 892,000. Claims remained well above the 200,000 level reported back in February.5 The Canadian real GDP surprised mildly to the high side of expectations with a 0.4% advance in October.6

Global equities posted their highest monthly return since the turn of the century in November. All 50 countries included in the global benchmark gained as prospects for overcoming COVID-19 considerably improved. U.S. markets saw their best performance since April. The S&P 500 gained 10.9% while smaller caps outperformed, with the S&P MidCap 400 and S&P SmallCap 600 rising 14.3% and 18.2%, respectively. Canadian equities posted strong performance in November, with the S&P/TSX Composite up 10.6%. European equities surged in November. The S&P Europe 350 had its best month ever, posting a total return of 14.2%. The S&P United Kingdom gained 13.3% as investors brushed off the fast-approaching year-end deadline for a trade agreement with the E.U. to avoid a no-deal exit from the trading bloc. Asian equities soared in November, with the S&P Pan Asia BMI up 10.4%. S&P Singapore BMI led the group up 15.2%, followed by S&P Korea BMI up 14.6%. Investment demand for gold via ETFs remains strong while gold has returned more than 20% in 2020 as of December 28.

In December, we maintained the asset allocation that was established in November for all models. We continue to favor shorter duration fixed income. With interest rates low or negative, we have maintained exposure to gold. Equity exposure across all models reflects our view that markets are looking through the uncertainty of the pandemic and towards the resumption of more normal life once the population is vaccinated.

We are closing in on the end of a year that introduced the current global pandemic, triggering the deepest global economic setback of the post-war era, record joblessness in North America, second and third virus waves, U.S. civil unrest, a near-war with Iran, trade and tech tensions with China, a Russian hack, Brexit uncertainty (again), and an endless U.S. election cycle that then required four days to declare a winner. The pandemic is unfortunately not over as we enter 2021. Our approach to portfolio management is nimble, opportunistic, and deliberate in identifying asset classes that are best placed to generate returns in a new world order. Our focus is on protecting portfolios from downside risk, and we believe that our investment process is working to achieve that goal.


Deborah Frame, President and CIO


Trading Economics. ECP Emergency Purchase Program. December 10, 2020.

Trading Economics. U.S. Fed Funds Rate. December 16, 2020.

Trading Economics. U.S. Retail Sales. December 16, 2020.

Trading Economics. U.S. Housing Starts. December 17, 2020.

Trading Economics. U.S. Unemployment. December 4, 2020.

Trading Economics. Canada GDP Month over Month. December 23, 2020.


Index return data from Bloomberg and S&P Dow Jones Indices Index Dashboard: U.S., Canada, Europe, Asia, Fixed Income. November 30, 2020. Index performance is based on total returns and expressed in the local currency of the index.