CHANGE

FINDING BALANCE AS TRANSFORMATION HITS MARKETS.

The past year has taught us the power of transformation through suffering, as pandemic lockdowns have forced many of us to reassess our priorities and really think about what we want in a post-COVID world.

Some themes are already starting to emerge and while not all will guarantee a better future, we think it is nonetheless encouraging to see the direction things are headed.

As change spreads through economies, markets and our daily lives, finding balance will be key to ensuring the risks don't outweigh the rewards.

ESG Investing

One of the key themes that is gaining momentum is the push to make the global economy more environmentally friendly.

ESG compliance is going mainstream in order to attract the vast amount of capital being raised to invest in companies that take environmental, social and governance concerns seriously. Last week, for example, BlackRock announced that the US$7 trillion asset manager is making climate change central to its investment strategy in 2021.

Some regional governments are implementing changes to accelerate the transition to electric vehicles as well, with Quebec and California announcing their intent to ban the sale of new gas-powered vehicles by 2035. China also just announced its intention to step up environmental policies to achieve peak carbon emissions prior to 2030 and achieve carbon neutrality before 2060.

However, governments must be careful not to make the costs too much for their citizens and corporations to bear lest they opt for more balanced jurisdictions.

The recent big names to relocate out of California highlight that risk and include Tesla's Elon Musk, Dropbox's Drew Houston, Splunk's Douglas Merritt and Palantir's Joe Lonsdale. Even large market-leading firms such as Oracle are leaving San Francisco to places like Austin, Tex.

We think this is something Trudeau may be missing given his recent announcement to hike carbon taxes by over five times the current level.

Main Street

Help is finally coming to Main Street via fiscal spending, which is in stark contrast to what happened following the 2008 financial crisis. In particular, monetary policy didn't have the desired trickle-down effect from the asset inflation it created and subsequently widened the wealth inequality gap. Narrowing this gap is paramount when it comes to creating economic and political stability, which is also great for markets, by the way.

That said, countries like Canada are using their central banks to print money to buy debt being issued to fund record-setting deficit spending, some of which has nothing to do with the pandemic. This in itself is a very dangerous experiment that could have long-term consequences.

Work/life balance

We are learning that working from home has not impeded productivity levels but actually improved them. This is because non-essential meetings are no longer taking place and time and money are being saved by holding long-distance meetings electronically. There are some negatives though such as the corporate cultural impact from the lack of in-person collaboration, as well as the blending of work hours into personal time.

This is why we think some form of hybrid relationship will occur with a mix of both home and at office time during the week which will have all kinds of implications.

In the midst of this Christmas season, it's helpful to remember it represents a time of hope in a better future. For those following Advent, the root of the word is derived from Latin adventus meaning “coming” or “arrival.” Heading into 2021, we look forward to finding the right balance in the coming post-COVID world.

Martin Pelletier, CFA, is a portfolio manager at Wellington-Altus Private Counsel Inc. ( formerly TriVest Wealth Counsel Ltd.), a private client and institutional investment firm specializing in discretionary risk-managed portfolios, investment audit/oversight and advanced tax and estate planning.