May 25, 2021 | Juiced

This is hump day, apparently. It’s the moment when more than half the US population has been jabbed. According to Wall Street that’s the net effect of 164 million people (61% of the population) having had a first dose and 130 million who are fully vaccinated. New shots are being administered at the rate of 1.8 million a day. President Biden is pushing for 70% coverage by the 4th of July. You will not believe the fireworks planned.

Covid cases have dropped to the lowest level since last June. This is a big reason stock markets have been humming along in record territory despite rising bond yields and the certainty CBs will start throttling back on the stimulus before long.

Corporate earnings are swollen like a yak in season. More than 80% of big corps beat the street with Q1 numbers. People are expecting year/year profits for Q2 will crush last year by 50%. “Certainly, we are looking for a continuation of earnings gains,” says analyst Ed Pennock. “These companies will be able to pass on most cost increases. They’ll be able to weather inflation without losing their gross margins.” That’s because consumers are not only sitting on a mountain of pandemic savings but, unlike the morose doomers who crawl into this blog to pet the puppies, they’re optimistic. Pumped. Amped up. People just wanna shop, drive and indulge.

It’s on this – solid GDP growth, full employment, robust earnings, a surge in value stock, heaps of capital and herd immunity – that the premise of the Roaring Twenties is based.

Is this euphoria misplaced? Are we too horny, too quick?

Seems we little northern beavs are getting just as juiced about the future as Americans. This week’s Nik Nanos polls shows consumer confidence at a record level, as the vaccines flow and reopening plans are announced. Almost half of us expect a stronger economy over the next six months and 62% think real estate will continue to wobble higher.

This suggests more spending, more jobs and stronger growth. The expectation is for the GDP to inflate by close to 7% annualized in the last six months of 2021. Once again, this is all about vaccines – which have always been the one and only door out of this pandemic nightmare.

So where are we now?

As of this week 24.2 million doses have been distributed and 21.1 million of those have been used. Forty million more are coming in June and half of us have had at least one. Just 4% are fully vaccinated, but several provinces are accelerating their second-jab programs. In the industrialized world, we’re 3rd in terms of herd dosing, after the UK and America. From a dismal and disgraceful start in early 2021, the Canadian catch-up has been impressive. (That’s why you can expect an election in October.)

Vaccines are the only story that matters in 2021. They dictate the markets. Job prospects. Economic growth. Your RRSP and TFSA performance. Plus the price pressures on bungalows and golden doodles. Those who oppose dosing because it infringes on their liberties, or needles scare them, or they succumb to social media side-effect scare stories, or they’re selfish, are free riders. The ant-vaxers whose comments are routinely deleted here deserve public contempt. They have mine. The only valid reason not to be inoculated is messing with an existing medical condition. And not many fall into that category. Fear does not give you a pass.

Bank earnings start tomorrow with BeeMo. On Thursday the numbers flow from RBC, TD and the penguin guys. National on Friday. Scotia next week. With the Third Wave closures, revenues may be down a little from earlier in the year but far less money will be set aside for bad loans. Low interest rates have squeezed margins, but mortgages have been on a tear as have capital markets.

The banks are a proxy for the economy. They’re harbingers of the future. They will also be repopulating their glistening towers in the heart of the Big Smoke.

Normal is coming. Embrace it.

Garth Turner May 25th, 2021

Posted In: The Greater Fool

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