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Martin Nel shares his synthesis on recent events and data that have informed his outlook on how COVID-19 will affect major players in Canadian Retail Banking.

Covid-19: When will it end? What will be the damage to the economy? What will be the impact on the major players in Canadian Retail Banking? 

Looking at the S&P 500 over the last few weeks, it seems that it will all be over soon, with limited economic damage. Let’s call this the mild outcome.

A Reuters poll of 25 economists says the Canadian economy will shrink by 27.5% this quarter. In April the US growth in unemployment equals the total working population of Canada (~20 million people). Per The London Times Britain is on course to suffer its worst recession for 300 years. Economic indicators say this will go on for quite a while and the damage to the economy will be significant. I’ll call this the severe outcome.

Now, the efficient markets hypothesis says that stock prices reflect all available information and is therefore the best possible prediction of the future. There is also a view that stock markets are driven by irrational human psychology, amplified by trading algorithms. Then again, economic data is reported by publications and neutral stories don’t attract eyeballs or win Pulitzer prizes. 

Bottom line: We don’t know which scenario will materialize.  

So, let’s look at both scenarios and the impact on Canadian Retail Banking.

Included in this article:

• De-globalization
• Delinquencies and losses
• Home prices

Read the full article, Covid-19 and Canadian Retail Banking – Things are not looking too bad for the Dinosaurs, on the NelInc.ca website.