As vaccinations rates rise and COVID-19 cases fall in Canada, everyone is interested to know when the world will reopen and — just as importantly — what things could look like when our pandemic is under control. TD Wealth recently brought together its top thought leaders in a forum to discuss a wide range of subjects, including vaccination rates, how quickly the economy will jump back to life and what sectors investors should watch for along the way.
Here are six insights we took away from the event.
Health: Watch for wavelets
For Dr. Vipan Nikore, the steep decline in infection rates has given him reason for optimism. However, the Chief Medical Officer for TD Bank cautioned that the rise of variants could lead to “wavelets” which may cause slight delays in reopening. He pointed to the U.K. where a sudden upsurge in cases, fueled by the Delta variant, pushed parts of the country back into a lockdown after it had almost fully opened up.
“The two factors to be mindful of are the variants and how fast we can get to herd immunity,” said Dr. Nikore. “When we see a spike, people will put the brakes on certain measures and some things may [temporarily] shut down.”
Investing opportunities: Adapt for a post-pandemic world
Chief Wealth Strategist Brad Simpson likened the economy to someone coming out of an 18-month sleep. “We took a pretty healthy economic body and we put it in a coma. Now what we are doing is bringing that patient back to life.” As the world reopens, investors should consider how it has changed. Many portfolios, he said, may have been built for a world before COVID-19. “A lot of the things that worked for the past decade might not work as well going forward,” he said. “Some of the issues we are talking about today will be here tomorrow. Some of them are just going to disappear,” and investors will need to adapt quickly.
Housing: Consider the condo
Chief Economist Beata Caranci echoed the thought that the economic reopening should progress with few major setbacks. We may expect Canada’s feverish housing activity to continue as well. Caranci suggested that prices could soften a little as people direct extra savings towards delayed travel plans, but forecasts the sellers market to continue with prices remaining elevated into 2022. She said that could lead some people to take a second look at condominiums. “Right now, a detached home is priced about 2.25 times that of a condo,” said Caranci. “People might think, I cannot buy that house, but maybe I can get a condo.”
Inflation: Price rises may be temporary
While Caranci sees inflation holding above 2% through 2022, she said those inflation pressures could dissipate as the economy finds its feet. Michael Craig, Head of Asset Allocation at TDAM, said that from an investing point of view, inflationary pressures should not have an impact in the near future as he sees a rotation away from economically-sensitive stocks to growth stocks, “the ones that are selling or designing things that will be the basis of the economy for the next five to 10 years.”
Sustainable investing: Carbon reduction is here to stay
Craig also said that interest in environmentally friendly investments is growing quicker than it did pre-pandemic. “The move to reduce the amount of carbon we emit per unit of growth is a widespread global phenomenon that will not slow down, and it presents tremendous opportunities for companies,” he said. “It is important to think about this sector as a place for investment and to see how we create the carbon neutral economy we will eventually see in the last part of the century.”
Technology: Blockchain is in its infancy
Craig also pointed out that while digital currencies get the headlines, the potential of the underlying blockchain technology may be a reason for investors to become better acquainted with advances in the sector. Having a diversified digital network that processes transactions is revolutionary, he said, and highlighted the potential it could have in a world where the majority of the world’s population don’t yet have digital wallets.
“The technology is one of the greatest inventions since the internet,” Craig said, but emphasized that the technology is still in its infancy. Like the early days of any new sector, many players may not last in the long term.
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