It is safe to stay no expected a global pandemic to shut down global economies or anything else for the matter. This year exposed many things including risks, and opportunity. More than anything we hope it made humans, in general better.
In hindsight, closing borders earlier, and tightly would have been the correct move to gain control over the spread of COVID-19. When the spread has gone out of control a complete lockdown -right down to zero activity over two weeks would have been the best course of action. Although not popular.
What we are seeing are the consequences of inability to make bold decision in particularity Canada. The results are prolonged economic, and socioeconomic damages that will take more time, and more money to fix. It seems like there was enough done to control the pandemic, and just not enough to prolong it. We are still puzzled by why there is still a systemic failure to protect our elderly citizens.
Sectors
We will be seeing a K recovery with some sectors getting hit in a devastating fashion that will require substantial help; air lines, and the tourism servicing sector is in trouble. Those are overhead heavy industries, and we hope the government will step up with help. We are typically against governments writing cheques but since they are the ones to shut their earning ability it is the correct thing to do.
The resource sector has never had a clear solid support level. We like to look at it as a production ‘must’ to meet the global needs to maintain the function of societies. For oil we can see the minimum oil demand is 85 million barrels a day. The consumption is roughly 0.5 gallons per person per day. This really reaffirms that demand not only going away but will be substantially hard to replace.
Timing
The pandemic hit during a market bull run that, we believe, was coming to an end. This made many stats, and markets very murky. The amount of money printed gave a second breath into the bubble – growing it, and will make the burst much more violent.
There is no better time to plan to review risks, and portfolio exposures vs capital needs. The next two years will be a bumpy ride but it will also comes with opportunities. Laser focus with proper moves is a must to prepare you for the journey to come.