Fiera Capital chief expects vaccine within the next year
Quebec’s largest independent asset manager is ready to bet one or more COVID -19 treatments will be found in the next 12 months, pushing global stock markets higher.
Fiera Capital chief executive officer Jean- Guy Desjardins says there’s an almost two-thirds probability that a vaccine will be found by June 2021. In the meantime, odds are that an existing drug can lessen COVID-19’S effects and reduce mortality rates, said Desjardins, a veteran money manager who founded Montreal-based Fiera in 2003 and counts four decades of experience in the investment industry.
After plunging in March amid the pandemic’s global spread, stock markets in North America and elsewhere have rebounded on optimism over a second-half economic recovery. Canada’s benchmark S&P/TSX Composite Index has gained more than 30 per cent since hitting a multi-year low in late March, though it’s still down about 10 per cent for the year.
“If we have a medical solution, with an existing drug in the short term and a vaccine by June 2021, as far as markets go it’s a blue-sky scenario,” Desjardins said in a telephone interview. “The economy can go full speed ahead. Based on the medical literature we’ve read, we put that probability at 65 per cent. That’s our call.” That, of course, still leaves 35 per cent odds a vaccine won’t be found over the next year. “As long as a medical solution hasn’t been found, markets will be in stop-and-go mode,” Desjardins said.
Lasting damage to the economy is another risk.
Canada’s gross domestic product contracted 8.2 per cent on an annualized basis in the first quarter, and many economists expect an even bigger decline in the second quarter.
“How permanent will the damage be? That’s the big unknown,” Desjardins said. “On the bright side, governments and central banks will support the economy, and their main goal will be to put people back to work. This means economic and fiscal policies will remain expansionary. So we probably have two or three years ahead of us where GDP growth exceeds the economy’s long-term potential, both in Canada and the U.S. This is good for stock markets.”
Investors should also be heartened by developments in the medical field, with more than 100 research projects now underway globally to find a vaccine, Desjardins said.
“I don’t think you’ll see just one vaccine being approved,” he added. “You’ll probably see two or three.”
In the meantime, COVID-19’S influence will also be felt on investments such as real estate.
While Fiera Capital is a relatively small property owner, with about $6 billion of its $158 billion asset base invested in the sector, it has been expanding its portfolio in recent years.
“COVID-19 has created a surplus” of office space, Desjardins said. “Even when the economy returns to normal, employees are going to spend a few days a week working from home. So I think there will be a slowdown in office building construction as a result.”
Large shopping centres also face hard times, according to the Fiera CEO.
“Everything that’s big in retail is under threat,” he said. “That’s true for malls, as well as retailers. There will be less foot traffic in these big malls, though the typical small mall, with a supermarket, a pharmacy and a hairdressing salon, isn’t at risk. You are going to keep going to your local Jean Coutu.”