November was an eventful month, with three COVID-19 vaccines reporting excellent test results, as well as surging numbers of pandemic cases in Canada and the United States, a contentious U.S. election, and a fiscal update from the Canadian federal government. The vaccine news prompted optimism that the pandemic would end sometime next year, with the hope that economies globally would then return to “normal”. That prospect led riskier assets including equities, commodities, corporate bonds, and preferred shares to enjoy robust gains. The U.S. presidential election took several days to determine Joe Biden as the winner, and the delay, while headline grabbing, had little lasting impact on markets as investors focussed instead on the vaccine developments. In doing so, investors also paid relatively less attention to the incidence of new COVID-19 cases more than doubling in the month and the reimposition of social distancing and lockdown measures in many jurisdictions. The FTSE Canada Universe Bond index earned 1.03% in the month.

Canadian economic data received in November showed that the recovery continued but at a slower pace than in the spring and summer. Unemployment edged lower to 8.9% from 9.0% the previous month as good job creation was offset by more Canadians returning to the labour force. The participation rate stood at 65.2%, only marginally less than the pre-pandemic level. Other releases showed housing starts remained strong while retail sales in September were better than expected. In addition, Moody’s reaffirmed Canada’s Aaa rating with a stable outlook. Less positively, Consumer Price Inflation was higher than forecasts in the month, and the annual rate rose to 0.7% from 0.5%. The number of COVID-19 cases rose sharply in several provinces in November, which resulted in closures of many stores, restaurants and other businesses to enforce social distancing.

The federal government, which had a few months ago promised an economic and fiscal update in November, delivered it with hours to spare at 4:00 pm on November 30th. The deficit estimate for the current fiscal year was raised to $382 billion from July’s $343 billion forecast and did not surprise many observers. The balance of the update was disappointingly lacking in specifics and details, so the market reaction was fairly muted.

1 2 3