Market Commentary: A Trade-off Between the Health of the Market and Health Itself.


By Rob Edel, CFA

Highlights This Month

Nicola Wealth Portfolio

Returns for the Nicola Core Portfolio Fund were +4.1% in the month of April.  The Nicola Core Portfolio Fund is managed using similar weights as our model portfolio and is comprised entirely of Nicola Pooled Funds and Limited Partnerships.  Actual client returns will vary depending on specific client situations and asset mixes.

The Nicola Bond Fund returned +3.9% in April. The unprecedented sell off in fixed income assets due to credit widening was met head on with significant government intervention helping to avoid a freeze in lending while narrowing credit spreads in the process. We continue to be overweight shorter dated credit with companies that have adequate cash and liquidity to mature their front end debt.

The rebound in credit was led by segments of the market that had been hit the hardest the previous month, namely lower quality BBB rated securities and bonds in the Energy space. Investment Grade supply continues to surge as companies have aggressively looked to raise capital. The robust new supply in the investment grade space has been met with a warm welcome as investors subscribed to new issues with historically strong demand.

During the month we sold some of our position in Sun Life Short Term to increase liquidity of our Nicola Bond Fund. Additionally, we previously took opportunistic exposure in bond ETF’s. As collateral damage in the selloff, the XCB ETF (iShares Canadian Corporate Bond index ETF) sold down to a -15% discount to net asset value. Not a lot of volume was transacted at these prices but we were able to pick up some of the ETF at large discounted prices. The trade netted us ~10% in a month and we have since sold this position as the discount to NAV is now flat.

The Nicola High Yield Bond Fund returned +3.8% in April keeping in line with the overall market as high yields rebounded with other risk assets. Prior to the sell-off, credit spreads in the high yield space were tight and were not compensating an investor to take undue risk. Thus, we were positioned more defensively. While we are still more defensively positioned than the overall market, tactical trades taking advantage of the opportunity and incrementally increasing risk has allowed us to achieve strong returns for April.

High yield bonds saw support from traditional investor inflows into the market as well as the Fed looking to support high yield market through ETF’s. The bounce back in returns saw both energy and gaming rebound strongly however, default rates appear that they will trend higher.

The Nicola Global Bond Fund returned +1% for the month. The Nicola Global Bond Fund benefited from falling sovereign bond yields and the tightening of credit spreads from massive monetary and fiscal easing as well as the optimism surrounding the reopening of various economies. Both Manulife and PIMCO performed well this month from their large credit exposure in North American IG & HY markets where credit spreads contracted 64bps & 136bps respectively.

Manulife benefited from their 20%+ weight in high yield credit exposure. Templeton slightly detracted from overall Nicola Bond Fund performance due to currency positions in Latin America (Argentine peso & Brazilian real). Performance of our managers in descending order: Manulife Strategic Income Fund +3.1%, PIMCO Monthly Income +2.1% and Templeton Global Bond -0.3%.

The returns for both the Nicola Primary Mortgage Fund and Nicola Balanced Mortgage Fund were +0.3% in April. One loan in the Nicola Primary Mortgage Fund did not make the April payment as a result of tenant rent non-payment and one loan in the Nicola Balanced Mortgage Fund did not make the April payment as a result of tenant rent non-payment.  In addition to one other loan in the Nicola Balanced Mortgage Fund that has been in default since late 2019 and is proceeding through the realization process.

A small number of borrowers are requesting some form of payment relief, with approvals being considered on an as needed and individual basis. New lending remains suspended given market uncertainty and heightened credit risk. Current yields, which are what the Nicola Primary Mortgage Fund and the Nicola Balanced Mortgage Fund would return if all mortgages presently in the Nicola Primary Mortgage Fund and the Nicola Balanced Mortgage Fund were held to maturity and all interest and principal were repaid and in no way is a predictor of future performance, are 4.1% for the Nicola Primary Mortgage Fund and 5.8% for the Nicola Balanced Mortgage Fund.  The Nicola Primary Mortgage Fund had 13.2% cash at month end, while the Nicola Balanced Mortgage Fund had 9.5%.

The Nicola Preferred Share Fund returned +10.8% for the month while the BMO Laddered Preferred Share Index ETF returned 12.4%. Low liquidity continues to hamper one’s ability to trade in the preferred market and a combination of excess cash along with defensive credit exposures caused a lag for returns as the market snapped back quickly. Trades that may have taken days to transact without pushing markets now take weeks. Earlier in the month, we purchased Enbridge preferred shares after they sold off aggressively. Once Enbridge shares started to recover, we transitioned to buying a basket of banks and insurance companies acting as a liquidity provider in the marketplace.

The S&P/TSX was up +10.8% while the Nicola Canadian Equity Fund was +9.2%. The largest positive contributing sectors to Index returns were Material (Gold) and Information Technology. Communications and Financials were weaker performing sectors in April. The underperformance of the Nicola Canadian Equity Fund was mainly due to the being underweight Gold and Technology where Shopify in particular has driven returns. The top positive contributors to the performance of the Nicola Canadian Equity Fund were Cargojet, Kirkland Lake Gold, and Wheaton Precious Metals. The largest detractors were Brookfield Asset Management, TD Bank, and Manulife Financial. We added Barrack Gold Corp in March. We sold Spin Master Corp.

The S&P/TSX was up +10.8% while the Nicola Canadian Tactical High Income Fund performed roughly in-line at +10.5%. The Nicola Canadian Tactical High Income Fund does not have any exposure to Information Technology which hurt relative performance. The Nicola Canadian Tactical High Income Fund benefited from a strong bounce back in Industrials and Consumer Discretionary.

Currently, we view the opportunities in the Nicola Canadian Tactical High Income Fund as very attractive as volatility remains elevated and as a result we feel that we can generate strong returns and income from the portfolio with our option writing strategies. The Nicola Canadian Tactical High Income Fund has a Delta-adjusted equity exposure of 78% and the projected cash flow yield on the portfolio is over 13%.

The Nicola US Equity Income Fund returned +10.6% vs +12.8% for S&P 500. All sectors provided positive returns last month with cyclicals leading the way while defensive sectors such as Consumer Staples and Utilities lagged.   The Nicola US Equity Income Fund was underweight Info Tech and overweight Consumer Staples which hurt relative performance during the month.

Positive contribution from select stocks were within Energy (Valero +39.7%), Info Tech (Microsoft +13.6%), Consumer Discretionary (Lowes +22.5% & Tractor Supply Co +20%) and Communication Services (Alphabet +15.9%).  The worst performing stocks were within the Utilities and Industrials sectors. The Nicola US Equity Income Fund ended the month 20% covered.  The delta-adjusted equity exposure is 90%.  Current annualized cash flow is 4.5%.  No new positions were added this month, but in the month of May we may scale back from staples and add to companies that have staple-like valuations but can show more earnings growth in this new environment.

The Nicola U.S. Tactical High Income Fund returned +10.1% vs +12.8% for S&P 500.  The Nicola U.S. Tactical High Income Fund had its best monthly return since inception while the S&P 500 had its best monthly return since 1987.  The Nicola U.S. Tactical High Income Fund benefited from a sharp rebound in the cyclical sectors (Energy, Industrials and Consumer Discretionary) with Valero alone up close to 40% for the month which contributed close to 95bps to the Nicola U.S. Tactical High Income Fund’s return.

The best stocks of the S&P were in the Energy sector and the cruise line names where returns ranged from 45% to 214%; however, in terms of Index return contribution, they didn’t add as much relative to the FAAAM stocks (Amazon, Facebook, Apple, Alphabet and Microsoft) which contributed close to 3.4% (27% of the S&P 500s total return).

Visa was added to the portfolio via Put options.  There were 14 Put options written with average annualized premiums of 12.5% with 25% downside break-evens.  Option volatility dropped 36% in the month but is still at levels almost double the past five year average.  The delta-adjusted equity decreased from 82% to 69.5%.

April delivered an impressive recovery in the equity markets from prior March lows in spite of growing unemployment levels and global lockdowns as a result of the COVID-19 pandemic.

The Nicola Global Equity Fund returned +7.7% vs +8.8% for the MSCI ACWI Index (all in CDN$).  The Nicola Global Equity Fund underperformed due to our relative underweights in the Technology and Healthcare sectors which were among the strongest performing groups in April as well as our underweight to the United States.

Performance was marginally offset by our overweight in Consumer Discretionary names and regional overweight to Japan. Performance of our managers in ascending order: Lazard +12.3%, EdgePoint +8.4%, C Worldwide +7.9%, BMO Asian Growth & Income +6.6%, ValueInvest +5.3%, and Nicola Wealth EAFE +4.5%.

The Nicola Global Real Estate Fund return was +0.9% in April vs. the iShares S&P/TSX Capped REIT Index (XRE) +6.1%. Overall, we see good value in publicly traded securities with many REITs showing attractive discount to NAV calculations. We have been increasing our allocation to the REITs in the Nicola Global Real Estate Fund. The REIT recovery in March lagged the TSX by a wide margin. Recovery in investor sentiment will take time and is likely tied to the reopening of the economy. Currently the focus is on monthly rent collection where the Apartment REITs have been performing well and the Retail REITs have been challenged. There were no new additions or subtractions in the month.

The Nicola Sustainable Innovation Fund returned +9.4% (+10.6% in US dollars) in April and has returned +3.1% (-3.8% in US dollars) year-to-date. The Nicola Sustainable Innovation Fund kept pace with the broader equity market rebound in April despite not owning many of the sectors and stocks that benefited from the increasing work from home trend including Amazon, Microsoft, Netflix, as well as the wider Energy and Consumer Discretionary sectors which were among the top performers in the month.

Our portfolio has more Utilities and Industrials exposure and many of the companies we are invested in were deemed essential services so there were less impactful COVID-19 related shutdowns to their products and services than other areas. Additionally, even with the ongoing volatility in the oil markets, power generation from renewable energy sources like wind and solar remain strong and the greater adoption trends of renewables remain intact even with lower oil prices.

Xebec Adsorption, TPI Composites, and Aptiv were the top contributors to performance this month. Iberdrola, and Alstom detracted from performance during the month. No new names were added in April; however, we took advantage of the ongoing market volatility and our cash position to add tactically to existing portfolio positions including BYD Co., Alstom, Hannon Armstrong, and Pinnacle Renewable Energy.

The Nicola Alternative Strategies Fund returned -4.0% in April.  Currency detracted -0.6% to returns as the Canadian dollar rebounded and strengthened through the month. In local currency terms since the funds were last priced, Winton returned -5.4%, Millennium +4.1%, Renaissance Institutional Diversified Global Equities Fund +5.5%, Bridgewater Pure Alpha Major Markets -21.8%, Verition International Multi-Strategy Fund Ltd +3.8%, RPIA Debt Opportunities -20.8%, and Polar Multi-Strategy Fund -5.5%.

The Nicola Alternative Strategies Fund saw a lagged response to the market correction in March. Over the long term, we expect the Nicola Alternative Strategies Fund to show little to no correlation to overall markets; however, over the short term the shock to the market had a larger impact to several fund strategies. RPIA Debt Opportunities invest in primarily investment grade debt that saw a large sell-off as credit spreads widened dramatically.

We believe that these negative returns are more a function of investors selling high quality assets to raise cash, and not indicative of significant impairments. Thus, we believe that as our bonds mature we will receive full value and prices should rebound meaningfully. Bridgewater takes a multi-year view of global markets to determine their investment allocation. They also suffered as all risk assets sold off significantly in unison. The long term ramifications of Covid-19 and the lock down are still quite unclear, as more is revealed of the landscape of lasting economic impact, the environment should benefit a macro orientated manager such as Bridgewater

The Nicola Precious Metals Fund returned +28.4% for the month while underlying gold stocks in the S&P/TSX Composite index returned 41.8% and gold bullion was up 6.0% in Canadian dollar terms. Gold stocks moved materially higher during the month. The initial market correction of selling all assets (including gold) to raise cash was subsequently followed by a more measured flight to safe haven assets such as gold, creating a firm bid for precious metals. Additionally, the Fed’s quantitative easing program helped stem concerns on the deflationary aspect of an economic shut down.

April in Review

April didn’t make up for March’s decline, but not for lack of trying as the S&P 500 rallied 12.8% to leave big cap US stocks down only 9.3% year to date.  From the March 23 lows, the S&P 500 recovered 30.4% by the end of April, nearly the exact same percent it had declined from the start of the year to March 23rd.

Unfortunately the math requires a recovery to be greater than the initial decline in order to get back to even.  The technology dominant NASDAQ faired even better, up nearly 15.5% in April and only -0.6% year to date.  The 100 largest companies in the NASDAQ were actually +3.4% year to date.

Canada also rebounded, with the S&P/TSX +10.8% for April but still -12.4% year to date.  So far, the current rally has been one of the strongest rebounds from a bear market in history, not only for US stocks, but globally.  The current bull market is even outpacing the 2009 bull market.

Fixed Income performed well last month

Stocks have been getting most of the headlines, but fixed income also performed well last month.  While Government Bond yields continued to move lower, the magnitude of the rally in interest rates was only a few basis points (Canadian interest rates rallied more, with 10 year yields falling 15 basis points).

The real action was in credit, with spreads in both investment grade and high yield tightening throughout the month.  According to the Bloomberg Barclays US Aggregate Corporate Average OAS index, investment grade spreads started the month +2.72% (meaning 2.72% above the equivalent US Treasury yield) and ended the month +2.02%.  At the beginning of the year, corporate spreads were only +0.93% points but widened to as high as +3.93% on March 23rd.

In high yield, the Bloomberg Barclays US Corporate High Yield Average OAS saw spreads decline from +8.80% to +7.44% by month end.  At the start of the year high yield spreads were only +3.66% points but had traded as wide as 11.0% on March 23rd.

Some analysts believe current high yield valuations might be a bit rich. 

According to Marty Fridson of Lehmann, Livian, Fridson Advisors, current spreads discount an 8% default rate by year end, lower than Moody’s Investors Services, who see 11.8% of speculative bond issues defaulting by the end of December and 13.1% by Q1/2021. Regardless, money has been pouring into corporate bond ETF’s and the rally in spreads is a positive indicator for market sentiment.

While the news was mainly good for Stocks and Bonds, the same could not be said for commodities, particularly oil. 

May WTI Crude oil future contracts stunned traders in mid April by doing what was thought to be the impossible, trading below zero for the first time in history.  The May contract, which was set to expire later in the month, traded as low as -$40 a barrel on April 20th and ended the day -$37.63 a barrel.

The June contract also traded sharply lower, but was never close to going negative and closed the week at a solid $16.94 a barrel.  Because WTI futures contracts settle with physical delivery, most financial buyers needed to roll out of the May contract (and into the June or longer term contract) before they expired, at any price.  They don’t have the ability to take physical delivery.

The problem with the oil market right now is it is becoming harder and harder for anyone else to take physical delivery right now, as demand has fallen off a cliff and storage capacity is starting to become scarce.  According to BMO Capital Markets, US crude demand declined about 6.6 million barrels a day, or by about one third, and will probably end up down 7 to 9 million barrels a day by the end of the month with demand being cut in half.

Supply will continue to decline, but producers are limited in how much and how quickly they can turn off the taps without permanently impacting well efficiency.  Oil did find support near the end of the month and has been trading above $20 a barrel in early May, but all bets are off for the rest of the month.

The current global economy is bad

The rapid decline in oil demand can only be described as epic and an indicator of what’s happening in the real economy.  We won’t go into a lot of details in regards to the economy, suffice to say it is bad.  With much of the world locked down, most countries will see peak hits to output in the 15-25% range with global GDP expected to contract around 17%.

As for the US, first quarter GDP fall 4.8%, but the lockdowns didn’t start to take effect until near the end of March so expect April to be much worse.  For the second quarter, economists are expecting the economy to contract an annualized 30%.

As for the job market, 20.5 million Americans lost their jobs in April and the unemployment rate roared to a post great depression high of 14.7%.  Believe it or not, this was actually better than economists were forecasting.  Good news, if you could call it that.

As bad as the economic numbers have been, the markets appear much more optimistic. 

While oil demand suggests a U shaped recovery at best and an L shaped, or depression, at worst, the rally in equities and credit spreads are suggesting a quicker V shaped recovery in economic growth. There appears to be a growing chasm between what Main Street and Wall Street are seeing and experiencing.

Monetary and fiscal policy helped Wall Street rally off the March 23rd lows, but it was signs the lockdown was easing that really moved markets last month.  In order to determine if the rally is sustainable, we need to take a closer look, not only at plans to re-open the economy, but the stimulus, the virus itself, and finally plans to treat it.

We’re seeing unprecedented monetary and fiscal policy

The biggest reason why the market is able to largely ignore the catastrophic collapse of the economy is due to the unprecedented monetary and fiscal policy being administered by the Federal Reserve and the Federal government.

The Fed has been a leader amongst central banks in ensuring financial conditions remain easy and companies have access to capital.  Same for the Federal Government, with a total of $2.9 trillion in aid representing 13.5% of GDP being allocated to help businesses and consumers survive the lockdown.  More will likely be needed, and more will likely be given.

Washington (Republicans and Democrats) agreeing on anything these days is rare.  Passing four stimulus packages in such a short period of time is a testament to the severity of the great lockdown and its impact on the economy.  The Federal Reserve and Federal government are doing everything in their power to ensure there still is an economy left to come back to when the time is right to ease social distancing measures.  It’s maybe a U shaped recovery rather than a V shaped recovery, but they don’t want it to turn into an L shaped recovery because viable companies went bankrupt and consumers permanently lost their jobs.

The longer the lockdown, the harder it is for monetary and fiscal policy to bridge the gap. 

Hope that we have seen “peak lockdown” and the economy can start to recover is what markets are really focused on.  Markets rallied last month on signs new cases have peaked and countries around the World are starting to detail plans to re-open their economies, including in the US.

The timetable in the US is left up to the state governors, but the Trump Administration has formulated a guideline with three phases requiring 14 days of improving new infection trends before regions can progress to the next phase.  Despite some protests against the lockdowns, most Americans are satisfied with the current restrictions, and would be hesitant to resume certain activities even if allowed. The markets liked the plans to lift restrictions, but many are worried they are premature and infections could spike higher.

And they have good reason to be concerned.  While new cases have peaked, they haven’t declined as quickly as in Europe and seem to have plateaued instead.  One of the explanations for this is lockdown measures have not been as strict in the US as in places like Italy and Spain, or even Canada for that matter.  Also, lockdown measures across the US vary by region, with some areas more strict than others, and while hard hit cities like New York are seeing cases decline, others are still experiencing a rising number of new cases.  The US has also lagged when it comes to testing, which is considered a key requirement in order to ease containment measures.

US epidemiology models have actually been revised higher, showing the potential for acceleration in cases and deaths. 

The University of Washington’s Institute for Health Metrics and Evaluation now believes US deaths could approach 135,000 by August, double their previous death toll projection, while a draft report from the Department of Homeland Security predicts new cases could reach 200,000 a day by June 1 and result in 3,000 daily fatalities.  Alternatively, an internal Trump advisor’s own modelling optimistically shows daily new death’s essentially going to zero by May 15th.

Even with the lack of adequate testing and required decline in new cases, many States are still moving to re-open their economies, with Strategas estimating 94% will be out of lockdown by Memorial Day.  These plans, encouraged by President Trump, are one of the reasons some epidemiologist models show fatality rates inflecting higher.

In early May, President Trump even threatened to disband the White House COVID-19 taskforce headed by Vice-President Pence, before backtracking a day later but still refocusing its mission to re-opening the economy.  In fairness, countries like Sweden have applied less stringent lockdown measures, and while their death rates are higher than Denmark and Norway, they are much lower than Spain and Italy.

Sweden is less densely populated and it’s citizens are healthier (less obese) than Americans, but it may be a model of how some activities, like eating at restaurants, could be acceptable and not lead to outbreaks that overwhelm the healthcare system. Denmark was the first European country to loosen lockdown measures and 20 days later, despite opening some schools, new cases haven’t risen.  Using Sweden as a guide, a more “risk based” social distancing strategy might be key to reopening the economy, weighing the cost of various mitigation methods versus their benefit of reducing fatalities.

As mentioned above, testing can also lower the need to quarantine, with BCA Research estimating mass testing of the entire population every two weeks would lower the percentage of people being infected to 20% and mean only 5% to 10% would need to be quarantined versus 50% without testing.  BCA Research also highlighted the positive impact wearing face masks has on the virus replication rate.

Maybe we have over reacted and the lockdown was not needed?

The problem is there is still so much about the coronavirus we don’t know, starting with how many people have had it and what the real fatality rate is.  We know how many people have tested positive, but there are likely many more that have had COVID-19 but never got tested.

A recent Washington Post article highlighted the phenomenon of “thinkihadititis” in which many people are convinced they already have had COVID-19.   If this were the case, the fatality rate might be much lower, perhaps as low as the seasonal flu.  Then why have we seen a spike in deaths above what would historically have been expected, with many dying years before they should have?

While it is possible the cause could be non-covid-19 related, it is likely this is not the case.  Given the rise in fatalities, if it is true a lot more people have been infected and the fatality rate is much lower than expected, it would also imply the infection rate is much higher.  Overloaded hospitals tell us COVID-19 is worse than the flu, either because the fatality rate is higher or it’s more infectious.  We don’t dismiss the ability for practical social distancing, testing, and contract tracing to help keep infections manageable, but we fear a second wave and higher fatalities if we are too aggressive in rolling back social distancing without a plan to keep new infections in check.  What is the right balance between easing the burden on the economy and preventing the spread of the virus?  The risk in aggressively easing social distancing rules right now is that we just don’t know.

Social distancing will be needed until science provides a solution

Though we don’t know the right level, we are pretty sure at least some social distancing will be needed until science provides a solution, with either treatment options which reduce or eliminate hospital stays, or ultimately a vaccine to prevent infection entirely.

Treatment options will get better, but a silver bullet solution is not likely in the short term.  As we learn more about COVID-19, it will become clearer which drugs will be more effective at different stages of infection and doctors will have an arsenal of options to work with.  Gileads’s antiviral Remdesivir has shown promise in some trials (and not in others) but it needs to be administered early.  Other drugs, like Roche’s anti-inflammatory Actemra or Regeneron’s Kevzara, might be more effective later on when the body’s own immune system is in overdrive and causing the damage, not the virus.

Expect trial results from existing drug treatments to be released over the summer, but novel drugs, which should have much better efficacy, will take much longer.  There will be some disappointments, like President Trump’s Hydroxychloroquine, which is likely a bust, but there is just too much scientific firepower being directed at the various treatment options for positive results not to be expected.

For a vaccine, it’s hopefully a question of when, not if, and here the story is mixed. 

Some experts warn 12 to 18 months is aggressive given the current record for developing an entirely new vaccine is four years.  Others are optimistic  we could have a vaccine as soon as this fall using new gene based solutions, which are quicker to develop and easier to manufacture, but also unproven. Some experts suggest these new technologies might provide only partial protection and more traditional vaccines will be required for full protection, but will take much longer to develop.

In either case, in order to shorten the timeline, risks will need to be taken, both from a health and financial perspective. Trials will need to be shortened and run simultaneously, which could result in safety issues not being caught.  Also, manufacturing is typically only built once a vaccine is approved given the financial risk involved.

We won’t have this luxury with COVID-19.  Government, or more precisely taxpayers, will underwrite the risk of building manufacturing capacity before trial results confirm the vaccine is effective and safe. Any positive news on the vaccine front would move the market materially higher, but we fear it might take longer than expected and many are discounting the best case scenario.  It is also a possibility that we don’t get a vaccine at all, in which case treatment options will be our main defense.   Our conclusion is that treatment options are going to get better over time, and maybe even lead to a cure.  The longer one can delay, or even prevent, being infected, the better.

Where does this all leave us?

Fiscal and monetary policy has backstopped the market by providing a liquidity and financial bridge through the economic collapse created by the lockdowns.  As bad as the current economic situation is, traders will look past the carnage given countries are starting to unwind social distancing measures and bring their economies back to life.  This is the good news.  What is not so clear, however, is how successful we will be in finding the right balance between keeping the infection rate low and getting back to a normal life.

Until a vaccine or effective treatment options are available, the economy will not return to its previous capacity, and the longer it takes, the more likely structural damage will be done, no matter what the Fed does.  Tough decisions will be needed as governments face a tradeoff between the health of the economy and health itself.  Making it even tougher, these decisions will need to be made while we are still accumulating the information needed to make them.

Because President Trump has based his re-election platform on the success of the economy, it becomes questionable whether he is able to objectively steer us between these two alternatives.  His daily press briefings last for hours and are filled with contradictions and inaccuracies as Trump takes center stage instead of stepping aside and listening to the health experts.

According to a recent poll, US voters are starting to catch on, trusting state governors and health experts over Trump on when to reopen businesses.  Interestingly, according to Barron’s Big Money poll, institutional investors still believe Trump will be re-elected and is better for the economy than Joe Biden.  Perhaps, but this won’t be the case if infection rates ramp back up and another lockdown is needed.

It could be that optimal social distancing measures mean current restrictions can be loosened and Sweden is the right model emulate. But then America isn’t Sweden, and the President won’t wear a mask.  We remain cautious until more is know about the virus and how best to contain it.  At the very least, we don’t think the market is properly discounting the uncertainty present in regards to COVID-19 and its impact on the economy.

 

This material contains the current opinions of the author and such opinions are subject to change without notice. This material is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information presented here has been obtained from sources believed to be reliable, but not guaranteed. Returns are quoted net of fund/LP expenses but before Nicola Wealth portfolio management fees. Past performance is not a guarantee or a reliable indicator of future results. All investments contain risk and may lose value. Please speak to your Nicola Wealth advisor for advice based on your unique circumstances. Nicola Wealth is registered as a Portfolio Manager, Exempt Market Dealer and Investment Fund Manager with the required provincial securities’ commissions. This is not a sales solicitation. This investment is generally intended for tax residents of Canada who are accredited investors. Please read the relevant documentation for additional details and important disclosure information, including terms of redemption and limited liquidity. For a complete listing of Nicola Wealth Real Estate portfolios, please visit https://realestate.nicolawealth.com. All values sourced through Bloomberg. Effective January 1, 2019 all funds branded NWM were changed to the fund family name Nicola. Effective January 1, 2019, the Nicola Global Real Estate Fund adopted a new mandate and changed its name from NWM Real Estate Fund.