By Jon McKinney, President & Portfolio Manager, ZLC Wealth
A Message from ZLC Wealth: The Economy is Stressed, But there is Still Growth
If there is a positive to COVID-19, it is our profound appreciation of not only healthcare workers, but other front-line staff like grocery store clerks, delivery workers and cleaners. We are thankful for this, and for the staff who go through our offices every night to make it clean and safe. COVID is opening our eyes to many things, many bad but some are good.
In the US, there were 2,981,000 unemployment claims in the week ending May 9. This brings the eight-week total to 36.5 million. The US unemployment rate in April is 14.7%, but May will be worse. Goldman Sachs now expects a depression-level rate of 25%. These are hard times. In a May 10 story, Peter Hoskins of the BBC asked, “How bad will it be?” and “How soon will we recover?” He noted:
The answers to both of these questions will usually involve the use of one of four letters: V, U, W and L. That’s because this is how economists often label recessions.
These labels come from the shape of the charts typically seen during these periods that track economic activity such as employment, gross domestic product (GDP) – or economic growth – and industrial output.
We’re not sure what “letter” we have. V-Shape would be the best – fast recovery, just like the drop. Most think we’re not a V. U-shape is like a V, but the recovery takes longer to get started. W starts like a V, but the economy drops again, and is sometimes called a double-dip recession. L-shape is the worst. It means things stay bad for long.
I don’t think we are an L. Things are bad and they may get worse, but the recovery will come. Scientists are doing extraordinary things to provide us with a treatment or vaccine. Many, including Microsoft founder and global health philanthropist Bill Gates, Corona Virus Task Force member Dr. Anthony Fauci, and BC’s own Provincial Health Officer Dr. Bonnie Henry, see a vaccine as inevitable. Not immediate, but inevitable. In the meantime, while our economy is stressed, we see areas that are still growing.
Microsoft (the biggest weight in the Manulife Global Equity Strategy run by Mawer) has grown in value 41% over the last year and 15% in 2020. This is a brilliantly run company that is a key player in cloud computing, office products like Windows, hardware like Surface Pro laptops, and media like LinkedIn. On their quarterly earnings call April 29, Microsoft CEO, Satya Nadella said “Windows 10 now has more than 1 billion monthly active devices, up 30 per cent year-over-year”. Microsoft Teams has been setting records with more than 75 million daily active users. Microsoft is growing.
So are Amazon, the world’s largest on-line retailer and Netflix the largest subscription streaming service. Apple is not doing badly either. We now chat daily with our adult children on Facetime. Facetime was only released by Apple in 2011 but now we wonder how we could live without it. Same for Zoom, an on-line videoconferencing service, that I hardly knew a few weeks ago and now use multiple times a day. Zoom has gone from 10 million customers a day at the beginning of the year to 200 million now, and its market cap is bigger than the 7 biggest airlines in the world combined!
COVID is a nightmare. People have died sooner than they should and the economy has slowed. But this too shall pass. In the meantime, we look for the positives, like our appreciation of healthcare workers and Microsoft.
Let us know if you have any questions.
Best regards and be safe,
Article reposted from ZLC Wealth’s May 27th blog article.
DISCLAIMER: This newsletter is solely the work of the author for the purpose to provide information only. Although the author is a registered Investment as a Portfolio Manager at ZLC Wealth Inc. (ZLCWI), this is not an official publication of ZLCWI. The views (including any recommendations) expressed in this newsletter are those of the author alone, and are not necessarily those of ZLC Wealth Inc. The information contained in this newsletter is drawn from sources believed to be reliable, but the accuracy and completeness of the information is not guaranteed, nor in providing it does the author or ZLCWI assume any liability. This information is not to be construed as investment advice. Your own circumstances have been considered properly and that action is taken on the latest available information. This newsletter is not and under no circumstances is to be construed as an offer to sell or the solicitation of an offer to buy any securities. This information is given as of the date appearing on this newsletter, and neither the author nor ZLCWI assume any obligation to update the information or advise on further developments relating to information provided herein. This newsletter is intended for distribution in those jurisdictions where both the author and ZLCWI are registered to do business. Any distribution or dissemination of this newsletter in any other jurisdictions is prohibited. The rate of return shown is used only to illustrate the effects of the compound growth rate and is not intended to reflect future values of the Fund or returns on investment in the Fund. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the offering memorandum or prospectus of the Fund before investing. The indicated rates of return are the historical annual compounded total returns including changes in unit value and reinvestment of all dividends and does not take into account sales, redemption, distribution or optional charges or income taxes payable by any unitholder that would have reduced returns. Performance results are not guaranteed, values may change frequently and past performance may not be repeated. IMPORTANT INFORMATION: The above commentary may contain an update on certain funds offered through ZLC Wealth Inc. Returns are net of fees and include reinvested dividends. The performance of the fund presented in this document may be for a different series of fund than the series that you hold in your account. The performance of the series that you hold may be different than what is shown. This information does not constitute an offer or solicitation to anyone in any jurisdiction in which such an offer or solicitation is not authorized, or to any person to whom it is unlawful to make such an offer or solicitation. These products may not be appropriate for all investors. Important information about the funds is contained in the offering documents which should be read carefully before investing. You can obtain these documents from ZLC Wealth Inc. Please speak to a ZLC Wealth Portfolio Manager or Representative to determine if these products are right for you.