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January 5, 2021

GLOBAL INDUSTRY OUTLOOKS BRIGHTEN

Despite prevailing uncertainty and a fragile recovery, global industry outlooks are starting to brighten, says a report from Moody’s Investors Service. Its analysis of non-financial corporate outlooks finds that the trend in fundamental business conditions for various industries over the next 12 to 18 months has shifted to mildly positive. Seven of 28 industry sectors now have positive outlooks, up from zero in mid-2020, it says. The rapid improvement in sector outlooks in the second half of 2020 “reflects the positive impact on business conditions of the easing of widespread lockdowns,” says the rating agency. However, there remains a high degree of uncertainty about the effects of the pandemic which may inhibit future improvements. “Despite the rapid development of coronavirus vaccines, it will be many months before they are widely available, so the end of the pandemic remains difficult to predict,” it says. As well, in a downside scenario of renewed global lockdowns, business outlooks would likely turn sharply negative once again.

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January 5, 2021

BITCOIN RALLY NOT OVER

Monday’s fall in the price of Bitcoin does not signify an end to the rally in the cryptocurrency, says Michael Hall, co-founder and CIO of Nickel Digital Asset Management, because corporates and institutional investors will continue to increase their exposure to the cryptocurrency, this will fuel long-term price appreciation. “Due to the inelastic supply of bitcoin, it can suffer from upside volatility in thin markets, giving rise to spikes which resolve quickly but usually at higher levels, as has happened several times in recent months, most notably around Thanksgiving,” he says. There are several factors that make Bitcoin attractive to institutional and other professional investors which bode well for its long-term prospects. The supply of bitcoin is capped at 21 million and its issuance schedule is hardcoded and completely uncorrelated with changing demand, which makes it a powerful hedge against currency debasement and inflation as governments and central banks roll-out COVID-19 stimulus packages to support economies. As well, its analysis reveals that Bitcoin price movements have exhibited a low correlation to equity market moves over the last 10 years. During major S&P500 drawdown periods, Bitcoin demonstrated an independent behaviour pattern. Whilst in several instances of market liquidity implosions (such as March 2020) the price of Bitcoin corrected in unison with the S&P500, on many other occasions it delivered completely opposite returns. This makes Bitcoin an important diversifier for portfolio allocation purposes. As well, the infrastructure around Bitcoin and other digital assets is improving with established financial institutions now offering bitcoin custody services and several major central banks seriously considering the possibility of developing their own digital currencies. This would provide a strong endorsement for the concept.

January 5, 2021

FUNDED POSITION CONTINUES TO RECOVER

Driven by equities, Canadian pension plans’ funded position continued to recover in the last quarter of 2020, says the ‘Mercer Pension Health Index.’ However, major risks lie ahead due to the economic damage caused by the pandemic. The index increased from 107 per cent at the end of September to 114 per cent at the end of December and is up two per cent from the beginning of 2020. The median solvency ratio of the pension plans of Mercer clients was at 96 per cent on December 31, up from 93 per cent on September 30, but lower than the 98 per cent at the beginning of the year. During the fourth quarter, funded positions of DB plans continued to recoup the losses incurred in the first quarter. The improvement was primarily driven by equity markets, aided by slightly higher bond yields, and the impact of the recent changes to the Canadian Institute of Actuaries’ commuted value standards. “The funded positions of defined benefit plans “endured a gut-wrenching decline” in the first quarter of last year, but most are now back at or close to their pre-pandemic level, says Ben Ukonga, a principal in its financial strategy group. Canadian DB plans remain well-funded by historical standards, even with liabilities measured at today’s ultra-low interest rates, he says. With the recovery in funded positions from the lows of March 2020, the rollout of the COVID-19 vaccine, and the anticipated re-opening of the global economy, there is cause for optimism for 2021 and beyond. However, significant risks will linger, including the pace at which the pandemic subsides, significant increase in debt levels, persistent low interest rates, and geo-political tensions, he says.

January 5, 2021

FIERA SELLS BEL AIR

Fiera Capital Corporation will sell Bel Air Investment Advisors, its ultra-high net worth private wealth platform, to Hightower Advisors, a U.S. investment advisor. Concurrently, the company has completed the sale of Wilkinson Global Asset Management, its New York-based private wealth investment manager, to Wilkinson Global Capital Partners LLC. Jean–Philippe Lemay, its global president and chief operating officer, says the transactions allow it to better align its remaining regional platforms for private wealth management and transition them to a globally integrated model.

January 5, 2021

BROOKFIELD MAKES PROPOSAL

Brookfield Asset Management Inc. has proposed acquiring the limited partnership units of Brookfield Property Partners L.P. that it does not currently own. Nick Goodman, CFO of Brookfield Asset Management, says, “The privatization will allow us to have greater flexibility in operating the portfolio and realizing the intrinsic value of Brookfield Property’s high-quality assets.”