Stock markets in in North America are set to open roughly 2% lower. As has been the case for the recent past, the Canadian dollar is highly correlated to equities and is trading down 0.5%. Oil is also down, by 4%. Many are pointing to the renewed rise in COVID cases across the southern US as well as much of the developed world as driving the change in risk perception. But it is unclear whether the sell-off over the last week is related to economic and health developments or whether it is simply a break from the incredible increase in financial asset prices that we saw in the month prior to last week. Regardless, it is now obvious that markets were ahead of economic and public health recovery. We expect the high volatility to continue for some time before we reach a relative equilibrium and see more stability in financial asset prices.
