In his second letter to clients, the head of RBC InvestEase, Rajan Bansi explores whether this March will be defined by lions or lambs.

It’s long been said March ‘comes in like a lion, out like a lamb,’ owing to the harsh gusts of winter that open the month and the green shoots of spring that bring it to a close. Of course, the annual transition between seasons is not without bumps and curves along the way, with unexpectedly balmy weather earlier in the month sometimes followed by a final blast of winter days, if not weeks, past the spring solstice. Still, the transition between seasons is not in doubt even if the exact timing is unknown. Similar sentiment, albeit in the opposite direction towards greater ferocity, seems to be afoot in financial markets with regards to the Canadian economy.

Stock, bond and commodity markets expressed an increasingly optimistic tone towards the end of February signaling that the Canadian economy is set to come roaring back by the second half of 2021. The benchmark S&P/TSX spent the entire month of February in positive territory and has been one of the strongest global equity markets to date this year. The bond market also has an enthusiastic view of domestic growth as evidenced by the yield on the benchmark 10-year Government of Canada bond, now flirting with levels not recorded since February 2020, when the global pandemic had not yet slammed on the breaks to growth.

Commodity markets are similarly bullish on growth with Western Canadian Select crude oil trading comfortably above $40, up over 800% since the lows reached in April 2020. None other than the modest Canadian loonie captures anticipation of roaring growth later in the year as it continues to hover close to US$0.80, which is higher by nearly 15% from the levels last March and in line with its 40-year average.

Want some details on the source of this growth? Our colleagues at RBC Economics recently published a report and produced this video on the two-gear nature of the recovery in Canada. Residential housing and some pockets of business investment are strong, although a return to full output will require a bounce back in sectors such as travel, leisure and entertainment. In its report RBC Economics also notes how the role of vaccine deployment is a source of optimism since the majority of Canadians over the age of 50, who have accounted for 99% of COVID deaths, are now expected to be vaccinated by the end of June. We would expect the direction of equity, fixed income and even currency markets to move in reaction to vaccination efforts across the country and globally, and to the speed with which economies reopen.

Speaking of loonies, did you know clients of RBC InvestEase can earn $25 for each referral to friends and family who proceed to open an account with us? Simply log in to your account to access your personalized link and share it with the people you know who would benefit from investing using a digital solution that emphasizes low fees, digital access and support from humans as needed.