Monday Market Minute | Oct 5, 2020

Partial lockdowns return in Ontario and Quebec — targeted restrictions limit economic fallout

What Moved

Ontario and Quebec reimposed restrictions in hotspot regions, rolling back indoor dining, gym access, and gathering limits in Toronto, Ottawa, Montreal, and surrounding areas. However, the approach was materially different from March — targeted rather than universal. Manufacturing, construction, and professional services continued operating. Schools remained open. The housing market showed no signs of slowing despite the restrictions. Private credit managers reported negligible impact on performing portfolios, with stress concentrated in the same sectors that had been challenged since March: restaurants, entertainment, and travel.

Why It Matters

The targeted lockdown approach validated the thesis that the second wave would be economically contained. For private market investors, the distinction between broad and targeted restrictions mattered enormously. A hospitality-focused private credit fund would feel the pain. A diversified MIC or PE portfolio with limited hospitality exposure would barely register the impact. The second wave reinforced the lesson that sector and geography-level analysis — not macro panic — was the appropriate framework for assessing private market risk.

Signal to Watch

Track small business closure rates through the fall. StatsCan survey data on business closures would indicate whether targeted restrictions were sufficient to prevent permanent business failures.

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