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August 28, 2020

The Resilient Economy During COVID Uncertainty: Weekly Market Update

The S&P 500's recent all-time high reflects market and consumer confidence that the country will move past the coronavirus pandemic next year, aided by unprecedented government and private-sector efforts to make a vaccine available by early 2021, according to City National Bank's investment leaders.

Robust demand for housing and cars also underscores U.S. consumer strength, despite the high unemployment and deep health concerns created by the lethal outbreak, the team said.

"Confidence is the key," said Garrett D'Alessandro, CEO of City National Rochdale, the bank's investment advisory organization, during the team's weekly market update.

Awaiting the Vaccine

Under Operation Warp Speed, a public-private program to accelerate the development of a COVID-19 vaccine, early doses could be released by late this year with production ramping up in the first quarter of 2021, according to information from the Department of Defense and Evercore ISI.

Should there be a significant delay — six to 12 months — “the stock market and the economy would probably experience a meaningful correction," D'Alessandro said.

Operation Warp Speed - Vaccine Chart

What's driving the economy?

City National Rochdale's leaders cited a mix of encouraging and troubling developments related to the pandemic, stock market and economy.

The S&P 500's recent high was driven largely by "fantastic technology companies that drive the digital economy," D'Alessandro said. Investors look forward to a "very, very strong" economic rebound in 2021.

With valuations high, Rochdale's leaders continue to expect a market correction and are surprised it hasn't happened yet, although the timing is difficult to predict, D'Alessandro said.

Despite high unemployment, consumer net worth has reached a record high as well, buoyed by high savings rates from emergency government stimulus checks and gains in home prices and stocks, according to the Rochdale team.

It anticipates further layoffs and bankruptcies from mid-sized and large businesses. However the U.S. economy is recovering more quickly than other countries, D'Alessandro said.

High household net worth bodes well for the economy heading into 2021, City National Rochdale Chief Investment Officer Tom Galvin said, noting that the government's extraordinary economic response to the pandemic and shutdown lifted U.S. household income to record levels.

Citing St. Louis Federal Reserve data, Galvin said roughly a third of consumers saved their stimulus checks, just over half used them to pay down debt and 15 percent spent the money. A decline in savings to pre-pandemic levels would increase spending by 11 percent, even without higher income, he said.

Chart showing that despite job losses, households have the capacity to spend.

"Our view on the economic front: Continue to expect growth through 2021. Housing should continue to be a solid contributor to economic activity going forward," he said, noting low interest rates, a shift to nesting at home and urban dwellers moving to the suburbs.

Citing multiple sources, Galvin called the recent U.S. recession the first with little or no effect on the housing market.

Chart showing that the housing market is still strong.

Tracking COVID

Meanwhile, coronavirus cases and hospitalizations continue to decline nationally, with more than 90 percent of the U.S. population living in states with transmission rates below one, meaning the spread is declining, D'Alessandro said, citing data from

Chart showing that the covid cases are continuing a downward trend.

While Spain and France have seen coronavirus flareups after large social events lacked proper social distancing and protective masks, these cases probably don't constitute a second wave in Europe, D'Alessandro said, citing Bloomberg data.

Chart showing that some countries in Europe are experiencing more COVID cases.

With Operation Warp Speed, he said, "we're really moving ahead" on developing a vaccine with the global scientific community, including multiple pharmaceutical companies doing "outstanding work" on compressing into a few months a process that typically takes one to three years.

The first vaccines won't be perfect but should be somewhat effective, D'Alessandro said, predicting that Phase 3 vaccine trial results will start to appear in the next two months.

The Political Year

Rochdale's investment leaders cited recent polling data indicating the Democratic Party could gain seats in the U.S. Senate — currently controlled by Republicans — which likely would bring significant policy changes, given that Democrats are likely to hold onto their majority in the U.S. House.

“With the prospects of a Democratic sweep, we think it's prudent to start planning ahead," even if the sweep doesn't materialize, Galvin said.

Chart showing the current polling data for the US Senate election.

For Your Consideration

City National remains underweight in U.S. mid- and small-cap stocks and European equities while favoring high-yield bonds, U.S. high-dividend and growth stocks, emerging market Asia equities, and alternative assets.

Given low rates on investment-grade bonds, high-yield municipal bonds are attractive, offering significantly higher income potential, Galvin said, citing data from multiple sources.

“While munis may not be for everyone, the income advantage is compelling," he said.

Chart showing the income potential on high yield bonds.

Anindya Chatterjee, senior vice president and lead portfolio manager, Fiera Capital, joined the update to discuss emerging market Asia equities, noting that they offer risk diversification and access to a significant part of the global economy.

“Much of emerging Asia has managed to contain the pandemic better than the U.S. Businesses are trending back to normalcy," Chatterjee said.

EM Asia drives global economic growth but is underrepresented in equity markets, he said, noting that Fiera prefers local consumer brands supported by the region's rising middle class.

Asian resiliency and fundamentals confirm the market's long-term value, Chatterjee said.

Chart showing the composite holdings of Fiera Capital

As far as client strategies, Rochdale portfolio manager Rachael Crane noted that City National seeks to optimize holdings for lifetime income by adjusting spending and asset allocation levers, revisiting client goals each year rather than relying on a traditional asset allocation approach.

Clients often see their goal as maximizing wealth at retirement and then shifting to conservative investments, but this can limit their spending potential and lower their portfolio balances faster, she said.

Chart showing the increased likelihood of meeting income needs during COVID.

In today's low-interest-rate environment, clients may not reach income and other goals without adjusting asset allocation, according to Crane.

D'Alessandro noted that the Federal Reserve indicated interest rates may stay low for up to four more years. "This is an unprecedented experience for fixed-income investors," he said.

In this election season and always, City National Bank and its investment advisory organization, City National Rochdale, remain committed to delivering objective, non-partisan market analysis and investment guidance, with the goal of helping our clients make informed financial decisions.

In these turbulent times, City National encourages you to review your investment portfolio with your advisor. Contact our financial professionals today to ask questions and receive help with your wealth planning needs.

Indices are unmanaged and one cannot invest directly in an index. Index returns do not reflect a deduction for fees or expenses.

The Standard and Poor’s 500 Index (S&P 500) is a market capitalization-weighted index of 500 common stocks chosen for market size, liquidity, and industry group representation to represent U.S. equity performance.

The Bloomberg Barclays US Corporate Bond Index measures the investment grade, fixed-rate, taxable corporate bond market. It includes USD denominated securities publicly issued by US and non-US industrial, utility and financial issuers.

The Bloomberg Barclays U.S. Corporate High Yield Index covers the U.S.-dollar denominated, non-investment grade, fixed-rate, taxable corporate bond market and includes securities with ratings by Moody’s, Fitch and S&P of Ba1/BB+/BB+ or below.

The Swiss Re Cat Bond Index tracks the return for all outstanding USD denominated cat bonds. The index is based on Swiss Re pricing indications only.

The Bloomberg Barclays US Treasury Intermediate Index measures US dollar-denominated, fixed-rate, nominal debt issued by the U.S. Treasury with maturities of 1 to 9.9999 years to maturity.

The Dow Jones US Select Dividend Index includes a selection of stocks based almost entirely on dividend yield and dividend history. Stocks are also required to have an annual average daily dollar trading volume of more than $1.5 million. These criteria help to ensure that the index represents the most widely traded of the markets highest-yielding stocks.

The MSCI Emerging Markets Index is a free-float weighted equity index that captures large and mid cap representation across Emerging Markets countries. The index covers approximately 85% of the free float-adjusted market capitalization in each country.

Benchmark indices are provided so that a strategy’s performance can be compared with the performance of well-known and widely recognized indices. A strategy’s holdings may differ significantly from the securities that comprise the index. It is not possible to invest directly in an index. Investors pursuing a strategy similar to an index may experience higher or lower returns and will bear the cost of fees and expenses that will reduce returns.

The Standard & Poor’s (S&P) 500 Index represents 500 large U.S. companies. The comparative market index is not directly investable and is not adjusted to reflect expenses that the SEC requires to be reflected in the fund’s performance.

The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The Russell 2000 is a subset of the Russell 3000® Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership.

MSCI Emerging Markets Net Total Return Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets.

MSCI Emerging Markets Asia Net Total Return Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the Asian emerging markets.

Net total return indexes reinvest dividends after the deduction of withholding taxes, using (for international indexes) a tax rate applicable to non-resident institutional investors who do not benefit from double taxation treaties.

MSCI World ex USA All Cap Index captures large, mid, small and micro cap representation across 22 of 23 Developed Markets (DM) countries* (excluding the United States). With 8,016 constituents, the index covers approximately 99% of the free float adjusted market capitalization in each country.

MSCI China Index: Measures the performance of large cap Chinese equities.

MSCI India Index: Measures the performance of Indian equity markets.

MSCI Indonesia Index: Measures the performance of Indonesian equities

MSCI Korea Index: Measures the performance of Korean equities.

MSCI Malaysia Index: Measures the performance of the large and mid cap segments of the Malaysian market.

MSCI Philippines Index: Measures the performance of the large and mid cap segments of the Philippines market.

MSCI Taiwan Index: Measures the performance of Taiwanese equity markets.

MSCI Thailand Index: Measures the performance of the large and mid cap segments of the Thailand market.

MSCI Hong Kong Index: Measures the performance of the large and mid cap segments of the Hong Kong market.

MSCI Singapore Index: Measures the performance of Singapore equity markets.

*DM Countries Include: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the United Kingdom.

Alpha: A measure of performance on a risk-adjusted basis

Currency Appreciation: An increase in the value of currency relative to another currency

Earnings Per Share (EPS): The portion of a company’s profit allocated to each outstanding share of common stock

Earnings Per Share Growth (EPS Growth): Illustrates the growth of earnings per share over time

Gross Domestic Product (GDP): Market value of final goods and services produced over time. This includes the income of foreign corporations and foreign residents working within the country, but excludes the income of the country’s residents and corporations overseas

Gross Domestic Product Growth (GDP Growth): Illustrates the growth of gross domestic product over time

Sharpe Ratio: A measure of risk-adjusted performance

This presentation does not constitute tax, accounting, or legal advice and that the audience should retain their own tax, accounting, or legal adviser regarding such matters.

Investments in emerging markets instruments should be made only by sophisticated investors or experienced professionals who have independent knowledge of the relevant markets, are able to consider and weigh the various risks presented by such instruments, and have the financial resources necessary to bear the substantial risk of loss of investment in such instruments.


The strategy seeks long-term capital appreciation by investing in quality companies in emerging markets. The team’s opportunistic process seeks to capitalize on underlying regional macro trends and global macrodynamics which, combined with fundamental bottom-up security selection, may result in more concentrated regional investments. The composite, created on December 31, 2011 and brought under the Fiera Capital Inc. name on December 1, 2017, is composed of all discretionary accounts managed in the Emerging Market Select strategy. The accounts included in the composite reflect accounts managed by the Emerging Markets Select team and benchmarked against MSCI Emerging Markets Index and the MSCI Emerging Asia Index. None of the accounts in the composite use leverage.


Past performance is not indicative of future results. Inherent in any investment is the potential for loss.

Charts and graphs herein are provided as illustrations only and are not meant to be guarantees of any return.


Each member of the Fiera Group of companies only provides investment advisory services or offers investment funds in the jurisdictions where such member and/or the relevant product is registered or authorized to provide such services pursuant to an exemption from such registration. These include the entities listed below. Where an entity operates under an exemption from registration (the "Exempt Entities"), only its jurisdiction of incorporation is listed. Details on the particular registration and offering exemptions for the Exempt Entities' activities are available upon request.

Fiera Capital Inc. – United States, registered as (i) an investment adviser with the U.S. Securities and Exchange Commission (the "SEC")* and (ii) a commodity pool operator with the U.S. Commodity Futures Trading Commission.

*Registration with the SEC does not imply a certain level of skill or training.


Certain information contained in this document may constitute “forward-looking statements,” which can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” anticipate,” “project,” “estimate,” “intend” “continue,” or “believe” or the negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties, actual events or results or the actual performance of the Fund may differ materially from those reflected or contemplated in such forward- looking statements.

These statements may include statements regarding the intent, belief or current expectations of Fiera Capital with respect to, among other things: (i) the diversification of the portfolio; (ii) the ability to identify investment opportunities; and (iii) the performance of various investments.


Portfolio details, holdings and allocations, and characteristics are as of the date noted and subject to change.

Information regarding the investable universe and any other securities or scenarios available for the time periods shown are not intended as an indication of any given client’s portfolio. A client’s actual holdings, percentages, durations, and contributions may vary.

Top 10 holdings are based on size of the position in the portfolio. The specific holdings identified are not representative of all holdings and it should not be assumed that the holdings identified were or will be profitable.


This presentation is privileged and confidential and it is intended solely for the use of the person to whom it has been delivered (or persons within the recipient’s organization) for the purpose of evaluating Fiera Capital Inc.’s business and is not to be reproduced or distributed to any other persons (other than persons in the recipient’s organization) without the prior written consent of Fiera Capital Inc. This presentation is not a complete summary of the terms of the investment management services offered by Fiera Capital Inc. and is qualified in its entirety by, and must be read in conjunction with, more detailed information regarding Fiera Capital Inc., including Part 2 of its Form ADV. Fiera Capital, Inc. and City National are non-affiliated, separate legal entities. 

Any opinions expressed in this presentation may be subject to change without notice. Although statements of fact and data contained in this presentation have been obtained from, and are based upon, sources that Fiera Capital Inc. believes to be reliable, Fiera Capital Inc. does not guarantee their accuracy, and any such information may be incomplete or condensed. No representation is made that the information contained herein is accurate or complete, and it may not be relied upon as such.

Certain strategies are not currently managed in a fund context and are available in a separately managed account (SMA) format and is tailored to the accountholder’s needs.

This presentation is for general information and education only. City National makes no representations or warranties in respect of this presentation and is not responsible for the accuracy, completeness or content of information contained in this presentation. City National is not responsible for, and expressly disclaims all liability for, damages of any kind arising out of use, reference to, or reliance on any information contained in or from the site. The information in this presentation should not be used to obtain credit or for any other commercial purpose nor should it be construed as tax, accounting, regulatory or legal advice. Rules in the areas of law, tax and accounting are subject to change and open to varying interpretations and you should seek professional advice from your advisor. Nothing in this presentation should be construed as an offer, or solicitation of an offer, to buy or sell any financial instrument. It should not be relied upon as specific investment advice directed to the viewer's specific investment objectives. Any financial instrument discussed in this presentation may not be suitable for the viewer. Each viewer must make his or her own investment decision, using an independent advisor if prudent, based on his or her own investment objective and financial situation. Prices and availability of financial instruments are subject to change without notice. Financial instruments denominated in a foreign currency are subject to exchange rate risk in addition to the risk of the investment. City National Bank (and its clients or associated persons) may, at times, engage in transactions in a manner inconsistent with this presentation and, with respect to particular securities and financial instruments discussed, may buy from or sell to clients or others on a principal basis. Past performance is not necessarily an indication of future results.

The material contains forward-looking statements regarding intent, beliefs, or current expectations which are used for informational purposes only. Readers are cautioned that such forward-looking statements are not a guarantee of future performance, involve risks and uncertainties, and actual results may differ materially from those statements as a result of various factors. The views expressed are also subject to change based on market and other conditions. Furthermore, the opinions and information presented do not involve the rendering of personalized investment, financial, legal, or tax advice. Certain information has been provided by third-party sources and, although believed to be reliable, it has not been independently verified and its accuracy or completeness cannot be guaranteed. Any opinions, projections, forecasts, and forward-looking statements presented herein are valid as on the date of this document and are subject to change. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results.

City National Bank provides investment management services through its wholly owned subsidiary City National Rochdale, LLC, a registered investment advisor. Content from the August 26, 2020 presentation, “Resilient Economy, Covid Uncertainty – Awaiting Vaccine," is reprinted by permission from City National Rochdale.

City National (and its clients or associated persons) may, at times, engage in transactions in a manner inconsistent with this article and, with respect to particular securities and financial instruments discussed, may buy from or sell to clients or others on a principal basis. Past performance is not necessarily an indication of future results. This article may not be reproduced, distributed or further published by any person without the written consent of City National. Please cite source when quoting.

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