Confidence

I have written often about the key to economic growth being tied to consumer and business confidence: confidence leads growth (as in the chart above). While we have certainly bounced from the lows in both consumer confidence and economic growth following the pandemic lock-down, we are not going to see the same magnitude of bounce in the near future as Covid / Coronavirus uncertainty remains high. Our desires to get back to a closer to normal life (immediate gratification) may have to be tempered as well.

Angus Reid Institute released a Sept. 8 report titled Economic Outlook: Covid-19 stalls trend of growing financial optimism in Canada. I might suggest having a look, as it paints a more realistic picture than the one currently being painted by stock markets (which, as I suggested in my Aug. 31 blog, are in bubble territory).

In a nutshell, Canadians are underwhelmed by what they expect the future will bring:

The main story is employment recovery, which tracks very closely to consumer confidence (and that does not require any significant amount of imagination to understand): unemployed consumers, or even those who might be concerned about their employment in the future are not going to be spending much other than on their basic survival:

Something to keep in mind because Apple, Amazon, Microsoft, Facebook and Alphabet (Google) require consumers to be spending to support their businesses (and earnings) and it is the buying of those 5 stocks that has been driving markets higher (since the lows in March). Until now, government payments supporting unemployed workers has muted the long-term impact on economies, but that will not last forever and eventually, as we might say, the "rubber will meet the road".

We should also be wary of financial and other lending institutions where there have been deferred payments on loans and mortgages. When deferments cease, the repercussions on the unemployed could be disastrous for those companies.

Are people going back to their office towers? To the malls? Sporting events? Concerts? Vacations and cruises? Not likely in the near term and for many, only if the current virus is eliminated. That will take time (if it is possible to do so) and in the interim our impatience with waiting for it to happen will grow.

I know it is not easy to be patient in the current times of fast information flow and the need to be constantly visiting our devices for the latest updates and opinions, but unfortunately patience and a sense of caution will be part of the new normal, especially when we have limited places to go for our distractions. Best we all settle in for the long haul: focus on our long-term goals and keep some safe cash (or equivalent) on hand for opportunities if and when they develop.