The world might be waiting on a Covid-19 vaccine, but thanks to policy booster shots, the stock market ended 2020 seeming to be largely immune from the contagion that still threatens Main Street businesses.
It might be hard to recall now, but 2020 started off with an economy full of potential: The Dow Jones Industrial Average was on track to break through the 30,000 threshold and the unemployment rate fell to 3.5 percent — the lowest in more than half a century. But things were already starting to unravel as an ominous viral pneumonia worked its way around the globe.
The Dow closed at a record high of 29,551 on Feb. 12 — then the patient took a turn for the worse. On March 9, 12, 16 and 18, circuit breakers designed to halt trading if the S&P 500 dropped by more than 7 percent kicked in when markets plunged. The market hit its nadir on March 23, with the S&P closing just above 2,237 and the Dow Jones a fraction below 18,592.
The Federal Reserve issued a flurry of announcements detailing emergency measures it was undertaking to backstop a number of behind-the-scenes markets, pledging to buy bonds and keep interest rates near zero, as an event that began as a public health crisis threatened to metastasize into a financial crisis.
On March 27, President Donald Trump signed into law the $2.2 trillion CARES Act, a rare act of bipartisan Congressional collaboration that provided enhanced unemployment insurance payments, forbearance on debts, suspensions of foreclosures and evictions, loans and grants for small businesses and payments of up to $1,200 for individual Americans.
The enormous, multitrillion-dollar scope of the rescue efforts along with the speed of implementation steadied the economic underpinnings of the market, and assisted in calming investors.
“I think the original bailout had a huge impact on the market. I believe without that package, we would not have bounced back,” said Joseph Heider, president of Cirrus Wealth Management.
In the ensuing months, a sharp — and for many, maddening — bifurcation took place as Covid-19 swept through the country in waves of mounting severity. The stock market clawed back its early-2020 gains and more, with the Dow Jones soaring above 30,000 for the first time in November.
On the ground, however, the economic picture looked far less celebratory for millions of American families. “There’s definitely a difference between what’s happening in the market and what’s happening in the real economy,” said Charlie Ripley, portfolio manager and senior investment strategist at Allianz Investment Management.
The unemployment rate receded from its April peak of 14.7 percent, but remained elevated, particularly for Black and Latino workers, whose November unemployment rates were 10.3 percent and 8.4 percent, respectively.
Even as the personal savings rate soared, bolstered by expanded unemployment benefits, forbearance programs and a sharp contraction in the service economy due to shutdowns, half of American families lost income as a result of the pandemic. More than two in five of those had not recovered that lost income as of December, according to a Bankrate.com survey. The losses were concentrated among the poorest Americans, who also anticipated the impact of longest duration: 41 percent of respondents with household income below $40,000 said their income would either take more than a year to recover, or would never recover at all.
“I think people were really shocked that the stock market recovered so well while the economy was doing so badly. But capital markets are a very cold, emotionless thing.”
Mitchell Goldberg, president of ClientFirst Strategy, said technical features of the way the major stock indices are designed accounts for much of the baffling divide between Wall Street and Main Street.
There were a couple of additional factors driving stocks higher in 2020. Goldberg credited the introduction of fractional shares and commission-free trading platforms like Robinhood with generating interest among a new, often younger crop of retail investors. The Federal Reserve’s interventions also kept fixed-income returns very low. Investors — whether big institutions like pension funds or just workers accruing retirement nest eggs in IRAs — had few choices other than equities to seek out meaningful returns.
As 2020 drew to a close, investors had two new reasons to breathe a sigh of relief: Certainty about the outcome of the presidential election, and good news on the Cover-19 vaccine front. The stock market always looks forward, and analysts said this is driving loftier valuations — even as politicians like President-elect Joe Biden and public health experts warn of a grim winter for the country.
Goldberg acknowledged that this disconnect can be frustrating, even alienating for the many Americans wondering what happened to their jobs, their savings accounts and their financial security.
“I think people were really shocked, and a lot of people were somewhat angry that the stock market recovered so well while the economy was doing so badly,” he said. “Capital markets are a very cold, emotionless thing.”
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
