Monday Market Minute | Sep 28, 2020

Second wave fears mount as COVID-19 cases rise across Ontario and Quebec

What Moved

Daily COVID-19 case counts in Ontario and Quebec began climbing sharply in late September, surpassing spring peaks and triggering concerns about a second wave. Provincial governments reimposed gathering restrictions and extended closures for indoor dining in hotspot regions. The TSX, which had been trending higher, pulled back modestly on the renewed uncertainty. However, the market reaction was muted compared to March — investors had recalibrated their assessment of pandemic risk. Private market managers reported no change to deployment plans, though monitoring of portfolio company exposure to renewed restrictions intensified.

Why It Matters

The second wave tested whether the lessons of March would hold. Private market investors who had survived the first wave understood the playbook: government support, deferral mechanisms, and central bank accommodation would likely be deployed again if needed. The key difference was that the economy was partially adapted — remote work infrastructure was in place, digital channels were operational, and businesses had built reserves. The second wave was a headwind, not an existential threat, for most private market portfolios.

Signal to Watch

Watch for targeted versus broad lockdowns. If provinces opted for sector-specific restrictions rather than full shutdowns, the economic impact would be contained — a critical distinction for portfolio exposure assessment.

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