3rd Quarter 2020 Market Review by Benoit Poliquin

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Executive Summary

A K-shaped recovery, and a future driven by new trends

A little over six months into the pandemic, some economic sectors have grown spectacularly, while other have been decimated – respectively, the upper and the lower leg of the “K” illustrating the shape of this unequal recovery that we are witnessing. This dynamic will affect some sectors more durably than others, creating new winners and losers. In managing your investments, part of our work is to assess the trends that are likely to continue for the foreseeable future.

Key Takeaway

South of the border, technology and concentration characterized the S&P 500: five “tech” names represented 25% of its market value, and the five largest stocks were up 31% (2% for the other 495 stocks), for a total index growth of 5.6% for the third quarter. In Canada, most stocks on the TSX were trading 10–20% below their pre-COVID-19 levels: from banks to telecom, including energy and pipelines, all have languished.

In this contrasting landscape, we nonetheless managed to find some great winners that were not part of the overheated technology sector. Indeed, as a rule, we prefer to invest in companies that leverage technology, provide key components, or are otherwise strategically positioned to profit from the Internet’s expansion, than in the actual technology providers. This strategy helps to provide more stable earnings per dollar invested.

As for bond yields, they have reached rock bottom. There is simply no alternative to stocks.


When investing, the adage “buy when there is blood in the streets, and sell when there is a parade” has stood the test of time. In other words, do not fall prey to fear or complacency. This is why taking a historical view is so important.

The earnings recession affecting many companies and industries is not due to secular trends, but rather to the pandemic. Pandemics do end, and human nature endures. For instance, after the attacks of September 11, 2001, many people swore they would never fly again; by 2006, airline traffic was back with a vengeance. The accelerated digital transformation we are witnessing could even usher in an era of higher productivity and create new well-paid jobs.

Taking the long view, discerning the trends that will endure and those that will revert will be our challenge during the next quarters. But one thing is certain: companies and brands that can maintain a connection with their customers online will win.

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