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Covid-19 Diligence Briefing

Our briefing for Monday, September 20, 2021:

  • In the United States, the average daily death toll for Covid-19 over the past seven days reached 2000 over the weekend, the highest it’s been since March according to the New York Times. More than 30% of those deaths were in Texas and Florida – Texas has vaccinated about 50% of its population while Florida has vaccinated about 56%. A Food and Drug Administration (FDA) expert advisory panel recommended on Friday that boosters be provided to those 65 and older as well as those with underlying health conditions.  Health experts have said they expect the FDA to expand that recommendation to the broader population in the coming days.
  • In Canada, as the federal election arrives, leaders are divided over their stances on vaccine passports and other Covid-19 related measures.  Prime Minister Justin Trudeau’s Liberal Party favours both vaccine passports and mandatory vaccination policies. New Democratic Party Leader Jagmeet Singh is also in favour of a national vaccine passport system, but Conservative Party Leader Erin O’Toole rejects the idea. His party still supports vaccinations but also favours alternatives like rapid testing.  Experts have weighed in and said vaccine passports are probably inevitable, pointing to the examples of Alberta and Saskatchewan, where two conservative premiers brought in vaccine passport measures after saying for weeks that they would not do so.
  • In the United Kingdom, a former prime minister has said 100 million Covid-19 vaccines are due to expire and be thrown away. Gordon Brown, referencing a new report by the research group Airfinity, said the world is facing a “vaccine waste disaster” and blasted world leaders for not developing plans to redistribute doses. The research by Airfinity predicts that 12 billion vaccines will be available around the world by December. Brown says it’s critical to determine how and where the vaccines will be distributed, pointing out that there is currently no plan to outline who will provide vaccines to poor countries. Brown sent the Airfinity research to political leaders including the U.S. president and the U.K. prime minister.
  • Italy has seen an uptick in vaccine appointments after the government announced that their health pass would be required for all workers. Italy’s pandemic commissioner Francesco Figliuolo said in a statement that there was an increase between 20% and 40% in bookings for the first dose, compared to last week. Last Thursday Italy became the first big European country to announce that their Green Pass would be required for all workers, public and private. “The Green Pass is an instrument of freedom that will help us make workplaces safer," Health Minister Roberto Speranza told a news conference. "The second reason is to reinforce our vaccine campaign."
  • New Zealand will ease some lockdown restrictions for its biggest city, as the government announces 22 new Covid-19 cases in the community. Prime Minister Jacinda Ardern says she is confident that there is no undetected transmission of the Delta variant, but tough curbs will still remain in place for Auckland after the alert drops from level 4 to level 3.  Schools and offices will stay closed, while residents will have to keep to their “bubbles.” Auckland will stay at a level 3 alert for at least two weeks, while the rest of the country remains under level 2. 
  • In Australia, New South Wales (NSW) reported 935 new Covid-19 cases, down from 1083 on Sunday and the lowest number since August 27th. "We're feeling more positive than we have in a couple of weeks... but I don't want any of us to sit back and think the worst is behind us," said State Premier Gladys Berejiklian. Some restrictions in NSW were relaxed for Sydney’s worst-affected suburbs; vaccinated people can now gather outside in groups of up to five, and time limits for outdoor exercise were lifted. Neighbouring Victoria state reported 567 new infections, its biggest daily rise this year.

Covid-19 – Due Diligence And Asset Management

U.S. to Open Air Travel to Most Vaccinated Foreigners

Brief: The U.S. will soon allow entry to most foreign air travelers as long as they’re fully vaccinated against Covid-19 -- while adding a testing requirement for unvaccinated Americans and barring entry for foreigners who haven’t gotten shots. The measures announced Monday by the White House are the most sweeping change to U.S. travel policies in months, and widen the gap in rules between vaccinated people -- who will see restrictions relaxed -- and the unvaccinated. The new rules will replace existing bans on foreigners’ travel to the U.S. from certain regions, including Europe. While the move will open the U.S. to millions of vaccinated people and was celebrated by the airline industry, the White House cast the measure as a crackdown, pointing to stricter testing rules and a new contact tracing regime. The new policy will take effect in “early November,” according to the White House, though the precise date isn’t yet clear.

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Covid crisis bruises Vietnamese trusts despite strong fundamentals

Brief: While the UK is making plans to protect itself from another Covid crisis it is easy to forget that some nations are in the middle of fighting the deadly virus. Vietnam is one such country. Up until the end of April it was a world leader in virus containment. However, since then a deadly fourth wave has caused significant disruption and markets have noticed. All three investment trusts that cover Vietnam are trading on double-digit discounts, despite achieving hefty returns across one and five years, according to figures from Association of Investment Companies (AIC) and FE fundinfo. Vietnam Enterprise Investments (VEIL) has returned 62.7% in one year and is trading on a 14.1% discount, VietNam Holding (VNH) has returned 88.7% and is trading on a 17.9% discount and VinaCapital Vietnam Opportunity (VOF) has returned 40.9% and is trading on a 20.6% discount.

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Corporate leverage returns to pre-pandemic levels

Brief: U.S. and European companies have marked another milestone in their road to recovery from COVID-19, seeing their debt levels relative to profits tumbling to the lowest since before the pandemic erupted in 2020. Net leverage, an important gauge of a company's financial health, refers to net debt as a proportion of EBITDA - earnings before accounting for interest, taxes, depreciation and amortization. At U.S. companies rated investment-grade, it fell in the second quarter to the lowest since 2018, according to BNP Paribas, while European leverage is the lowest since 2019.The trend is a good sign for corporate debt markets, where the lowest-rated segments are outperforming this year, signalling normalising credit quality.

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The City of London Finally Gets Back to the Office

Brief: On the lower floors of HSBC Holdings Plc’s Canary Wharf headquarters, the desks are filling up. Traders, salespeople and close support staff not currently in the office have been told they are expected to be at their workstations on the second to fourth floors of the tower five days a week, according to people familiar with the matter. The only exceptions will be for domestic emergencies and unavoidable family commitments.It's a sign that, after several false starts, the City of London's return to the office is at last gathering pace. At times over the past two weeks, trains have been at their busiest since the pandemic broke out, while the streets have been thronged with workers again.

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UAE central bank sees COVID-19 increasing money-laundering risks

Brief: The United Arab Emirates central bank sees increased risks of illicit financial flows emerging from the COVID-19 pandemic, including money-laundering and terrorism financing, it said in a report published on Sunday. The use of unlicensed money service providers for money laundering has increased during the coronavirus crisis last year, the report said, as well as the use of e-commerce to launder money. "Widespread lockdowns have resulted in a significant surge in e-commerce. Due to limited ability to move funds and goods during the pandemic, illicit actors are turning to e-commerce as a money laundering tool", it said. The number of so-called "money mules" - people who receive illicit funds into their bank accounts to hold or withdraw and wire elsewhere, taking a commission for their services - increased, the bank said, with accounts in the majority of cases belonging to low income individuals from Africa and Asia.

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Contact Castle Hall to discuss due diligence
 
Castle Hall has a range of due diligence solutions to support asset owners and managers as our industry collectively faces unheralded challenges. This is not a time for "gotcha" due diligence - rather this is a time where investors and asset managers can and should work together to share best practices and protect assets. Please contact us if you'd like to discuss any aspect of how Covid-19 may impact your business.

Our briefing for Friday, September 17, 2021:

  • In the United States, one in 500 people have now died of Covid-19 since the country’s first reported infection. Data from Johns Hopkins University shows 663,913 people in the United States have died of Covid-19 as of Tuesday, a grim figure that represents how badly the country is still struggling to contain the virus. The majority of hospitalizations and deaths have been among the unvaccinated and are largely concentrated in the south, where vaccination rates are lower. With only 54% of the population fully vaccinated, government officials and experts are pushing for widespread vaccine mandates. 
  • In Canada, three Covid-19 vaccines have been officially approved by Health Canada, and with the full approval comes name changes. The Pfizer vaccine will now be known as “Comirnaty,” a combination of Covid-19, mRNA, community and immunity. The Moderna vaccine will now be known as “Spikevax” and the AstraZeneca vaccine will dubbed “Vaxzevria.” Health Canada announced the name changes on Twitter on Thursday, also adding that the vaccines themselves have not changed, only the names. The U.S. and the E.U. are already using the new names for promotional purposes. 
  • In the United Kingdom, the government is expected to make changes to their international travel rules. While they recently relaxed the rules for the fully vaccinated, expensive testing for travellers arriving into Britain remains in place. According to reports, the government is expected to scrap the testing requirements, and to revise their traffic light system into simpler high and low risk categories. Many countries are expected to be removed from the high-risk red list.  Currently there are 62 countries on Britain’s red list, a category that requires travellers to quarantine for 11 nights in a hotel at their own expense. Quarantine requirements are expected to remain in place for red list countries.
  • In Brazil, the federal government wants to stop vaccinations for adolescents, after noting adverse effects and one death that’s currently under investigation. Health Minister Marcelo Queiroga said at a news conference that there have been 1545 adverse events registered, in addition to the one death.  He criticized state and city governments for issuing the shots to teens without underlying health conditions and maintained that healthy adolescents who have received one shot should not get a second. The country’s health regulator Anvisa said in a statement that it has no evidence to support the need for changes to its approval of vaccines for teens.
  • South Korea has reported over 2000 new coronavirus cases, almost hitting a one-day record set last month. More than 1500 of the 2008 cases were in the greater Seoul area. As the nation approaches its biggest holiday of the year, concerns that the spread of the virus will worsen are growing, as millions usually travel across the country for the Chuseok holidays. Chuseok, the Korean version of Thanksgiving, begins over the weekend and lasts into next Wednesday. “We plead once again that people who aren’t fully vaccinated not to visit their aging parents who are in their 60s or older,” said Deputy Health Minister Lee Ki-il during a briefing.
  • In Australia, Prime Minister Scott Morrison announced the trial of a home quarantine system for international travellers arriving in Sydney. The seven-day trial will take place later this month and will involve about 175 people, including both residents and non-residents, as well as some Qantas air crew.  "This is the next step in our plan to safely reopen, and to stay safely open," Morrison said. The announcement comes as Australia inches closer towards their reopening plan, aiming for 70-80% full vaccination rates for the adult population. So far only about 45% of adults in Australia are fully vaccinated.

Covid-19 – Due Diligence And Asset Management

World’s wealthiest families gained US$312B over past year

Brief: Abundant liquidity, soaring stock markets and accommodating tax policies have been favorable for growing dynastic wealth. The world’s 25 richest families are worth US$1.7 trillion, a 22 per cent increase from a year ago. The Waltons of Arkansas, who own nearly half of retailer Walmart Inc., top the list for the fourth year running with a net worth of US$238.2 billion. Their fortune grew by US$23 billion in the past 12 months, despite the family selling US$6 billion worth of stock since February. New names on the ranking include the Dassaults of France, a third-generation technology and aviation empire, and the New York-based Lauders of cosmetics-maker Estee Lauder. One notable dropoff is the Lees, the family owners of South Korea’s Samsung. They fell from the list after paying an US$11 billion inheritance tax following last year’s death of patriarch Lee Kun-hee.

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Private Equity Is Smashing Records with Multi-Billion M&A Deals

Brief: The private equity industry is on a spending spree like never before. Buyout barons Blackstone Group Inc., Apollo Global Management Inc., KKR & Co. and others account for a record 30% of global transactions this year, with deal flow and fundraising close to all-time highs. Investors are flush with cash and looking to put the money to work. In the U.S., a private equity consortium recently announced one of the biggest leveraged buyouts of all time. And in the U.K., PE funds have been at their busiest since the financial crisis, targeting household names including grocery chain Wm Morrison Supermarkets Plc. By mid-2021, the sector had amassed a record $3.3 trillion of unspent capital, including $1 trillion held by buyout funds, giving it significant fire power for fresh acquisitions.

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Global Economy May be Headed for Shorter, Sharper Cycles, SocGen Says

Brief: Frictions in the world economy, Covid-19 and a shift in thinking about monetary and fiscal policy augur a new era of greater volatility, according to economists at Societe Generale. The French bank expects more bottlenecks and spikes in demand for certain skills because of a synchronized acceleration of the transitions to a digital and low carbon economy, accompanied by changes in lifestyles after the pandemic. At the same time, major central banks are modifying strategies to tolerate inflation overshooting, and governments are embracing fiscal stimulus while worrying less about high debt. “All these movements are happening together, at the same time, on a global level -- for us, that in itself is a source of friction,” Societe Generale Chief Economist Michala Marcussen said.

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ISS Tells Five9 Investors to Reject Zoom’s $14.7 Billion Offer

Brief: Investors should reject Zoom Video Communications Inc.’s planned purchase of Five9 Inc., according to influential advisory firm Institutional Shareholder Services Inc. Zoom’s offer to acquire Five9, valued at $14.7 billion when it was announced, exposes the software maker’s shareholders to “a more volatile stock whose growth prospects have become less compelling as society inches towards a post-pandemic environment,” ISS said in a note published Friday. The all-stock deal, announced in July, took advantage of Zoom’s soaring stock price during the pandemic. Zoom would use the deal to expand into an adjacent market that could bolster revenue as lockdowns end. 

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How Did Investors End Up on the Other Side of This Trade?

Brief: The stock market selloff in early 2020 took with it a number of high-profile volatility-trading funds that were designed to do the opposite: provide a source of uncorrelated returns. Now Markov Processes International has produced new research indicating that at least one fund was behaving as though it was selling risky hedges, or insurance in simple terms, against a stock selloff to other market participants. That’s the opposite of many of the funds’ objectives, according to investors familiar with the funds. It’s unlikely that investors intended to be in the business of providing tail-risk hedges. But that may be exactly what they did, according to the findings of MPI, which used its proprietary, returns-based style analysis to delve into what drove the behavior of volatility funds, including Infinity Q, Malachite, Parplus Partners, and others, that blew up last year.

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Contact Castle Hall to discuss due diligence
 
Castle Hall has a range of due diligence solutions to support asset owners and managers as our industry collectively faces unheralded challenges. This is not a time for "gotcha" due diligence - rather this is a time where investors and asset managers can and should work together to share best practices and protect assets. Please contact us if you'd like to discuss any aspect of how Covid-19 may impact your business.

Our briefing for Thursday, September 16, 2021:

  • In the United States, a senior White House official says a new system for international travel is being developed. White House Coronavirus Response Coordinator Jeff Zients told the U.S. Travel and Tourism Advisory Board that the new plan will eventually replace existing restrictions, although he did not give any indication as to when that change will be made. "We are exploring considering vaccination requirements for foreign nationals traveling to the United States," Zients said on Wednesday. The new system will involve contact tracing of travellers to provide data to the Centers for Disease Control and Prevention. Zients says the administration is looking to lift existing travel restrictions as soon as possible.
  • In Canada, the province of Alberta is dealing with soaring case numbers as they struggle to contain the fourth wave of the virus. On Wednesday, Premier Jason Kenney declared a state of emergency and announced several new Covid-19 measures including a vaccine passport system. Alberta reported 24 new deaths on Wednesday, one per hour, and 1609 new cases. The premier warned that the situation is becoming increasingly severe and that the province could soon run out of intensive care beds. “Unless we slow transmission, particularly among unvaccinated Albertans, we simply will not be able to provide adequate care to everyone who gets sick based on current trends,” Kenney said.
  • In the United Kingdom, booster shots for people over 50 have been recommended as part of the government’s Covid-19 winter plans. The Joint Committee on Vaccination and Immunization (JCVI) made the recommendation that the boosters be given to everyone over 50 in addition to people with weakened immune systems and healthcare workers. Approximately 30 million people are eligible for the shots, which will be given no earlier than six months after a person receives their second dose. The boosters will be delivered beginning next week. Despite case numbers being in the 30,000 range, Prime Minister Boris Johnson has said his government will not introduce any further restrictions for England at this time.
  • In Italy, the Covid-19 Green Pass will be made mandatory for all workers beginning next month, a minister said. The Green Pass is a digital or paper certificate that discloses whether a person has been fully vaccinated, tested negative or recently recovered from Covid-19. Italy is the first European nation to require all workers to come under a vaccine passport system. Regional Affairs Minister Mariastella Gelmini said the cabinet plans to make the Green Pass mandatory for both public and private sector workers. People who don’t comply with the rules could face suspension without pay.
  • New Zealand reported 13 new Covid-19 cases, down slightly from 15 the previous day. This brings the total number of infections for this outbreak to 996. Prime Minister Jacinda Ardern is urging citizens to get vaccinated, not just for themselves but also for their children. “There’s a whole group of children that cannot be vaccinated right now, they’re not eligible. And yet we are increasingly seeing Covid-19 reach our children. So, if you don’t feel like doing it for yourself, do it for our kids,” Ardern said. So far about 69% of New Zealand’s eligible population have had their first dose of vaccine, while about 35% are fully vaccinated.
  • In Australia, Victoria state reported its highest jump in new coronavirus case numbers at 514, exceeding the previous record of 473 set on Monday. Melbourne remains under its sixth lockdown but is expected to reach the 70% first dose vaccination milestone by this Friday, which means some curbs around travel and outdoor exercise can be eased. New South Wales reported 1351 new cases, up from 1259 the previous day, and 12 new deaths, 10 of which were among unvaccinated individuals. Officials are urging Australians to get their vaccines, as they aim for 70% full vaccination rates before reopening.

Covid-19 – Due Diligence And Asset Management

Lack of knowledge prevents pension trustees from capitalising on post-pandemic investment opportunities

Brief: Professional trustees’ appetite for taking risk has increased since pre-pandemic, according to a new study of Professional DB Trustees, conducted by Charles Stanley Fiduciary Management. Almost half (47 per cent) of professional DB trustees revealed that their appetite for investment risk overall has increased, with around one in five (18 per cent) saying that it has increased significantly. Just 14 per cent said it had reduced. But the research also found that they feel their investment decisions are hampered by onerous regulation and a lack of knowledge.Professional Trustees want to take more risk across the board – in equities, credit markets and alternatives - as well as relaxing liability hedging. But burdensome regulation coupled with a lack of confidence in their investment knowledge mean it is unclear whether trustees have the freedom to enact their views.

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The Firms That Have Guided EMEA Investors Through the Pandemic

Brief: When it comes to making investment decisions in the European, Middle Eastern, and African markets, investors want the real thing. “In emerging markets, the human touch as ever is very important to have the pulse of the markets and, ultimately, make more informed decisions,” said Camille Asmar, head of equity sales for CEEMEA at HSBC. “You have to walk around the streets of Istanbul and Johannesburg or go to Riyadh and see exactly what is happening on the ground, how the population is behaving and thinking.” For much of the past 18 months, as the world grappled with Covid-19, this due diligence by investors was rendered nearly impossible due to lockdowns causing business travel to cease. But fortunately, the top equity sales and corporate access providers in the regions were there to step up.

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Boom for banks as M&A and pandemic boost corporate FX needs

Brief: A boom in corporate dealmaking, surging input costs and a focus on short-term cash flows in the pandemic have sent companies rushing to hedge their currency exposures this year, giving a boost to banks that sell foreign exchange products. Corporate treasurers say the pandemic, which sent revenues tanking in 2020 before this year's sharp rebound, has encouraged many to hedge currency risks more frequently. Relentless supply chain pressures, and a sharp rise in raw material and other input costs that are mostly denominated in U.S. dollars, are reasons for companies to lock in prices too. And a surge in mergers and acquisitions as the recovery takes hold is also lifting corporate demand for foreign currencies. Global dealmaking is running at a record high this year, with $3.9 trillion of deals already transacted by early September, according to Refinitiv data.

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World Economic Forum Is Set to Return to Davos Next Year

Brief: The World Economic Forum will return to the Swiss ski resort of Davos in 2022, after the pandemic forced organizers to shift to Singapore and then cancel their meeting altogether this year. The in-person event is scheduled for Jan. 17-21 and designed “to address economic, environmental, political and social fault lines exacerbated by the pandemic,” the group said on Thursday. It is working with the Swiss government and health experts to establish the appropriate safety measures. The meeting usually feature heads of states as well many of the world’s top executives, bankers and economic policy makers. “The pandemic has brought far-reaching changes,” WEF Founder Klaus Schwab said. “In a world full of uncertainty and tension, personal dialog is more important than ever.” 

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Toronto-Dominion Sees Broad Return to Office Delayed Until 2022

Brief: Toronto-Dominion Bank said a broad return of workers to its offices has been delayed until at least next year as Covid-19’s delta variant upends employers’ plans across North America. The lender, Canada’s largest by total assets, had said in March that employees working from home would likely continue to do so into the summer or potentially longer. Toronto-Dominion now doesn’t “currently expect a broader return to TD locations before calendar 2022,” Kenn Lalonde, the bank’s chief human resources officer, said in a memo to employees Wednesday. “We are monitoring the evolving situation and will update you when we have new information to share,” Lalonde said in the note. “In the meantime, we are making the necessary preparations for colleagues to be able to return to work on TD premises or third-party locations when conditions allow.”

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Contact Castle Hall to discuss due diligence
 
Castle Hall has a range of due diligence solutions to support asset owners and managers as our industry collectively faces unheralded challenges. This is not a time for "gotcha" due diligence - rather this is a time where investors and asset managers can and should work together to share best practices and protect assets. Please contact us if you'd like to discuss any aspect of how Covid-19 may impact your business.

Our briefing for Wednesday, September 15, 2021:

  • In the United States, case numbers and hospitalizations are still on the rise as delta continues to tear through the country. Cases are nearing levels not seen since last winter, averaging at about 170,000 per day, with deaths at around 1800 per day. This is still well below the peaks of January, when cases were hovering around a quarter-million per day, however officials are especially concerned about vaccine hesitancy as the majority of cases and deaths are among the unvaccinated. U.S. President Joe Biden says this is a “pandemic of the unvaccinated,” and his administration continues to advocate for widespread vaccine mandates.
  • In Canada, the province of Ontario has released more details of their vaccine passport program, which is set to come into effect on Sept. 22. The vaccine passports will be required in what are deemed to be high risk indoor spaces, such as indoor restaurants, bars, nightclubs, sports and fitness facilities, concerts and other large events. Individuals and businesses that don’t comply with the rules could be fined or charged, officials say. Meanwhile, the province of Nova Scotia has delayed the move into their final reopening phase as a result of rising case numbers. The province will now enter Phase 5 in two and half weeks, after their proof of vaccination policy takes effect.
  • In the United Kingdom, Prime Minister Boris Johnson has unveiled the government’s winter plans for dealing with Covid-19. Under Plan A, ministers will encourage widespread vaccinations, offer jabs to 12-15-year-olds and begin a booster program. Plan B, which the government will enact if the National Health Service (NHS) becomes overwhelmed, will mean the return of mask mandates, vaccine passports and guidance on working from home. “What I would stress about Plan B is that contains a number of different shots in the locker. And you wouldn’t necessarily play them all at once, far from it. You’d want to do things in a graduated way,” Johnson said at a news conference on Tuesday.
  • In France, vaccines for healthcare workers are now mandatory, and people could face suspension from their jobs if they don’t comply.  According to government officials, more than 90% of healthcare workers in France are vaccinated, which means that about 300,000 still haven’t got their shots. Unvaccinated healthcare workers can face suspensions without pay, but a top court has ruled that they cannot be fired outright. Healthcare workers who have only received one shot are required to take a Covid-19 test every three days until they receive their second one. Both shots are required for all healthcare workers as of October 15.
  • In New Zealand, officials are pushing to speed up the country’s vaccination campaign, as case numbers begin to fall.  The country reported 15 new infections on Tuesday, down from 33 the previous day, with lockdowns and border closures credited with keeping the numbers lower. "The vaccine is the best tool we have in our toolbox and our ticket to greater freedom," Prime Minister Jacinda Ardern told a news conference. "The more people who are vaccinated, the fewer restrictions you have to have." So far, only about 34% of New Zealand’s population have been fully vaccinated.
  • In Australia, a nightly curfew that was imposed on Sydney’s suburbs will be lifted, authorities announced, though other curbs will remain in place. In New South Wales (NSW), 80% of adults have now had at least one dose of vaccine, while 48% are fully vaccinated.  "The stabilization and decline in some areas of concern are pleasing and we are at a critical stage... but the best advice we have is that it's too early and too risky to do anything further today," said Premier Gladys Berejiklian during a media conference. NSW reported 1259 new cases, up slightly from 1127 the previous day.

Covid-19 – Due Diligence And Asset Management

TD's U.S. head sees 'sort of a pause' in the economic recovery

Brief: Toronto-Dominion Bank’s top U.S. executive said the American economic recovery has hit some speed bumps over the past month and a half, with COVID-19’s Delta variant spreading and businesses finding it difficult to hire qualified workers. “We’ve seen sort of a pause and in some spaces or industries -- a little bit of a tapping on the brakes,” Greg Braca, Toronto-Dominion’s head of U.S. retail banking, said at a Barclays Plc conference Wednesday. “And we’re watching how this plays out.” The U.S. economy gained 235,000 jobs last month, the smallest increase in seven months. Still, the large amount of cash that consumers have stockpiled along with a low level of loan defaults are keeping the bank “bullish” for the remainder of the year, Braca said at the virtual event.

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Pandemic Inflation Has Flipped: Now It’s the Rich Who Pay More

Brief: Inflation rates are now higher for top-earning U.S. households than those on low incomes, reversing the trend that took hold earlier in the pandemic, according to research by Harvard economist Alberto Cavallo. Covid-19 has caused headaches for price statisticians because it’s changed the way people spend. Headline measures of U.S. inflation use a basket of goods and services that’s based on pre-pandemic shopping habits -- so it doesn’t always capture the higher prices that Americans have been paying in the past 18 months or so. Cavallo, an inflation specialist, has come up with baskets weighted according to what consumers actually spent money on since the pandemic began. He found that the inflation rates experienced by different income groups, which were broadly similar in 2019, have diverged since then. In the pandemic’s first year, prices were rising faster for low-earners. In the last few months the opposite is true.

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Amundi's Wosol: Covid stocks still trading at 'significantly low' valuations

Brief: The head of the largest European value fund in the world believes the European value rotation has further to go as the threat of further lockdowns and new variants keeps Covid-related stocks underpriced. Andreas Wosol, Amundi's head of value who manages around €5bn in European equity value strategies, told Investment Week both Covid-related stocks and cyclicals are trading below pre-pandemic levels, creating opportunities for investors. "People are talking about a fourth lockdown, another wave of the Delta variant coming into play this autumn or winter so these stocks are still not fully back to their pre-Covid situation, making them an area in the market where you might expect recovery potential," he said. Wosol sees a lot of opportunities in the more consumer-focused areas of the market, including the automotive industry, media, and entertainment, as well as cyclical consumer areas, such as the retail that are trading "significantly low".

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UN Says World Economy to Grow at Fastest Pace in Almost 50 Years

Brief: The global economy is expected to undergo its fastest recovery in almost five decades this year, but deepening inequities between advanced and developing countries threaten to undermine this, the United Nations warned. Following last year’s 3.5% contraction, world gross domestic product will likely surge 5.3% in 2021 due to “radical” policy interventions and a successful, if incomplete, vaccine rollout in advanced economies, the UN Conference on Trade and Development said in a report Wednesday. Expansion may slow to 3.6% next year, taking the estimated cumulative income loss since 2020 to $13 trillion, it said. Many countries in the southern hemisphere have been hit especially hard during the pandemic, and fiscal constraints, a lack of monetary autonomy and poor access to Covid-19 vaccines could escalate economic stress on developing nations, according to the report.

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ECB’s Lagarde Sees Part-Time Home Office Outlasting Pandemic

Brief: Office workers probably won’t return to their desks full-time as companies learned to live with flexible arrangements during the coronavirus pandemic, according to European Central Bank President Christine Lagarde. “We’re heading toward a hybrid movement, where part of the week will be spent in the office so that people can meet, can see each other, can hold regular meetings and have face-to-face contact,” she said on “The David Rubenstein Show: Peer-to-Peer Conversations” on Bloomberg Television. “But the rest of the week will likely be working from home.” While the exact design of these new arrangements still needs to be determined, “people have learned during the pandemic, and those learnings will be bottled in and used for the future way of working,” Lagarde said.

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Contact Castle Hall to discuss due diligence
 
Castle Hall has a range of due diligence solutions to support asset owners and managers as our industry collectively faces unheralded challenges. This is not a time for "gotcha" due diligence - rather this is a time where investors and asset managers can and should work together to share best practices and protect assets. Please contact us if you'd like to discuss any aspect of how Covid-19 may impact your business.

Our briefing for Tuesday, September 14, 2021:

  • In the United States, booster shots are not needed for the general public, according to a group of international scientists who recently completed a paper on the matter. The paper, which was published Monday in medical journal The Lancet, was authored by senior vaccine leaders including some from the U.S. Food and Drug Administration and the World Health Organization. The authors say that governments are better off focusing efforts on people who aren’t vaccinated yet. “Even if some gain can ultimately be obtained from boosting, it will not outweigh the benefits of providing initial protection to the unvaccinated," the scientists wrote.
  • In Canada, as the federal election draws closer, leaders are taking a stand against demonstrations in front of hospitals and healthcare facilities. Prime Minister Justin Trudeau says if re-elected, he will crack down on the protests and make it an offence to obstruct access to any healthcare facility. The NDP’s Jagmeet Singh has also said he would make changes to the Criminal Code to create harsher sentences for those who intimidate or threaten healthcare workers. Conservative Leader Erin O’Toole also denounced such protests, saying peaceful protesting is quite different from this type of harassment
  • In the United Kingdom, jabs for 12–15-year-olds have been approved, as recommended by the U.K.’s four chief medical officers. According to the vaccines minister, Nadhim Zahawi, the government has accepted the recommendation and will start delivering doses next week. The program will operate within schools and the vaccines will require parental consent, although children can overrule parents in some situations. So far in the U.K., vaccines for children have been limited to those with underlying health conditions, but the chief medical officers say expanding the program will help reduce the spread of the virus in schools.
  • In Germany, a weeklong vaccination drive is underway, with healthcare workers taking up locations like shopping centres, sports arenas and hardware stores, to offer people vaccines without appointments. Under the motto #HierWirdGeimpft, which means “get vaccinated here,” the sites are listed on a national website and promoted with the hashtag on social media. The campaign runs all week until September 19. “It has never been easier to get a vaccination. It has never been faster," said Chancellor Angela Merkel in a video address. So far, 62.2% of the German population is fully vaccinated, while authorities are aiming for 75% 
  • In Italy, schools opened on Monday, with students in 10 of the nation’s 20 regions returning to the classroom. For the past year and a half, Italian students have been learning largely online, but authorities are determined to prevent a return to remote learning. Teachers, school staff and parents who enter school property are now required to carry the green pass, a digital or paper certificate that shows whether people have been vaccinated, tested negative or recently recovered from Covid-19. Education Minister Patrizio Bianchi said the reopening on Monday ran smoothly, with 93% of teachers presenting the green pass and others granted exemptions for health reasons. 
  • In Australia, a trial of vaccine passports will begin with some countries in the latest step to prepare for reopening. Minister for Trade and Tourism Dan Tehan made the announcement on Sunday, explaining that a QR code could be linked to real passports to prove the vaccination status of travellers. Among the countries included in the trial are Singapore, Japan, South Korea, the U.S. and the U.K., as well as Australia’s Pacific Islands.  Inbound travellers will have to be fully vaccinated by shots approved by Australia’s Therapeutic Goods Administration, which include Pfizer, Moderna, AstraZeneca and Janssen Cilag.

Covid-19 – Due Diligence And Asset Management

Covid Surge Imperils Small-Business Recovery, Goldman Sachs Says

Brief: Inflation pressures and a resurgence in coronavirus cases due to the Delta variant are hampering the recovery of small businesses across the U.S., according to a Goldman Sachs Group Inc. report. Among the 1,145 respondents surveyed around the end of August, about 75% worry about the impact of rising Covid infection rates on their businesses, Goldman Sachs said Tuesday in its report. Some 86% said they’re concerned about inflation, with 81% seeing an increase in pricing pressures since the firm’s last survey in June. The number of small-business owners who think the U.S. is moving in the right direction has declined in the period.“There’s been a big sentiment shift when it comes to inflation and workforce challenges,” Joe Wall, national director of Goldman Sachs 10,000 Small Business Voices program, which conducted the survey, said in an interview. Hiring conditions have also deteriorated since June. “Those themes are becoming more and more pronounced in terms of the challenges in addition to access to capital that we consistently hear from small businesses.”

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Wells Fargo Pushes Back Return-to-Office Date Again to Nov. 1

Brief: Wells Fargo & Co. delayed its return-to-office plans by another two weeks to early November. The firm, which has the biggest workforce of any U.S. bank, will now begin bringing back employees who have been working remotely starting Nov. 1, according to an internal memo Tuesday from Chief Operating Officer Scott Powell. The bank had previously planned on beginning the process Oct. 18.  President Joe Biden announced a plan last week to issue rules requiring large private employers to mandate shots or testing. Wells Fargo is evaluating how that might affect its return-to-office plans, Powell wrote in the memo. “We are studying these proposed requirements to better understand how they apply to our RTO plans, and will share more information when it is available,” Powell said.

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Global debt is fast approaching record $300 trillion - IIF

Brief: Global debt rose to a new record high of nearly $300 trillion in the second quarter, but the debt-to-GDP ratio declined for the first time since the start of the pandemic as economic growth rebounded, the Institute of International Finance (IIF) said on Tuesday. Total debt levels, which include government, household and corporate and bank debt, rose $4.8 trillion to $296 trillion at the end of June, after a slight decline in the first quarter, to stand $36 trillion above pre-pandemic levels. "If the borrowing continues at this pace, we expect global debt to exceed $300 trillion," said Emre Tiftik, IIF's director of sustainability research.The rise in debt levels was the sharpest among emerging markets, with total debt rising $3.5 trillion in the second quarter from the preceding three months to reach almost $92 trillion.

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City of London Staff Return in Largest Numbers Since March 2020

Brief: More people are back at their desks in the City of London than at any time since the pandemic forced the government to impose a lockdown 18 month ago. In the financial district, more than half of staff were back in their offices on Thursday, according to data compiled by Google, which tracks the locations of its users. The number of people returning has gradually ticked up in recent months, but the start of the school term is now accelerating the process. Many employers are pushing staff to come into work for at least a few days a week. Their return has boosted the local economy, with bars, coffee shops and restaurants last week appearing to be the busiest they’ve been since the pandemic struck. Traffic congestion and public transportation usage has also increased markedly.

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Manulife Joins Banks With Vaccine Mandate for Canadian Employees

Brief: Manulife Financial Corp. will require employees in Canada to provide proof of their vaccination status by the end of October and will force unvaccinated staff to undergo regular Covid-19 testing before they work in its offices. Employees who can’t be vaccinated for medical reasons must provide a note from a licensed health care professional, Manulife Canada Chief Executive Officer Mike Doughty said in a memo Monday. Those refusing the shots for religious reasons must make a written attestation. The life insurer’s move follows similar policies announced last month by top Canadian banks to make vaccines mandatory, with limited exceptions.

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Contact Castle Hall to discuss due diligence
 
Castle Hall has a range of due diligence solutions to support asset owners and managers as our industry collectively faces unheralded challenges. This is not a time for "gotcha" due diligence - rather this is a time where investors and asset managers can and should work together to share best practices and protect assets. Please contact us if you'd like to discuss any aspect of how Covid-19 may impact your business.

Our briefing for Monday, September 13, 2021:

  • In the United States, Dr. Anthony Fauci, U.S. top infectious disease expert, says more vaccine mandates will be needed to end the pandemic. Speaking to CNN on Sunday, Fauci said more schools and businesses may have to mandate vaccines in order to help keep the virus under control.  He said that the delta variant combined with vaccine hesitancy has created a very challenging time with the Covid-19 pandemic in the U.S. His comments come shortly after President Joe Biden’s announcement of new vaccine measures, which include a mandate for all federal workers to get vaccinated. Currently in the U.S. about 63% of the eligible population is fully vaccinated.
  • In Canada, the province of Alberta continues to lead the country in new and active Covid-19 cases. On Friday, Alberta saw 1473 new cases and 10 new deaths. Over 2400 Albertans have died of Covid-19, and one of those who died this week was a young, unvaccinated pregnant woman. Currently there are more than 16,000 active Covid-19 cases in the province. Demonstrations were held in the city of Calgary over the weekend to protest vaccine mandates and other health restrictions. The rallies were held to support nurses, firefighters, police and other public sector workers who are against vaccine mandates.
  • In the United Kingdom, vaccine passports will no longer be needed in England for access to nightclubs and other venues. Health Secretary Sajid Javid made a sharp U-turn on the matter, saying only about a week ago that it was the best thing for the industry. "This virus hasn't gotten anywhere, there's still a pandemic so of course we need to remain cautious,” Javid told the BBC on Sunday. “But we just shouldn't be doing things for the sake of it all because others are doing it. We should look at every possible intervention properly.”
  • In Japan, a 50% vaccination milestone has been reached, according to the government. Japan’s vaccine rollout began slowly and has followed behind those of other developed nations. The program began in mid-February with healthcare workers and then expanded to those age 65 and older in April. Despite facing shortages of imports, the program picked up the pace by the end of late May, eventually reaching 100 million doses per day. The government expects a large majority of the eligible population to be fully vaccinated by November, when they plan to ease some restrictions.
  • In New Zealand, Auckland will remain under strict Level four restrictions for at least another week, Prime Minister Jacinda Ardern announced.  The country reported 33 new Covid-19 cases, bringing the total for this outbreak to 955. “Level four remains our best option to beat Delta and contain the virus at this stage of the outbreak. We don’t want to risk the sacrifices everyone has made, and all the hard work you’ve put in, by moving to alert Level three too quickly,” Ardern said. The rest of the country will remain under Level two restrictions because of the risk of the virus spreading from Auckland.
  • In Australia, New South Wales (NSW) Premier Gladys Berejiklian says vaccination rates are slowing and urged the unvaccinated to come forward to get their shots. "For those of you who choose not to be vaccinated, that is your choice, but don't expect to do everything that vaccinated people do when we hit 80%," Berejiklian said at a media briefing. "Our vaccination rates keep increasing, however there has been a slight slowdown. So we encourage everybody to come forward and get vaccinated." NSW reported a total of 1257 new Covid-19 cases, while neighbouring Victoria state reported 473.

Covid-19 – Due Diligence And Asset Management

Scaramucci's SALT hedge fund confab returns in person in New York City

Brief: A marquee Wall Street conference returns this week, but much like everyone's pandemic-era plans, the event hosted by hedge fund executive and former White House communications director Anthony Scaramucci, will be a little different this year. The SALT event, one of the premier hedge fund industry conferences, kicks off Sunday at the Jacob K. Javits Convention Center in New York, rather than the Bellagio Hotel in Las Vegas where organizers hosted the event 10 times before. The annual conference in Las Vegas was famous for pool parties, private rock concerts, and exclusive dinners as managers tried to get commitments for big checks from pension funds or other institutional investors. The Delta variant — a more infectious version of the original coronavirus — will force changes at this year's event in New York where roughly 3,000 signed up after Scaramucci sent "save the dates" a few months ago.

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UK pay and spending shrinks in year of pandemic

Brief: UK households reduced their spending by an average of £109.10 ($150.85) per week during the coronavirus pandemic, while they also struggled with a fall in income, new research has shown. According to data from the Office for National Statistics (ONS), richer households saw a bigger cut to spending than poorer households during the year to March 2021. Restrictions on buying certain goods and services during the pandemic were part of the cause of the 19% spending drop across the country, as well as a fall in household income, and a shift to home working. At the height of the spring 2020 lockdown, more than one-fifth of usual spending was largely prevented, the ONS said. Lower spending on international holidays, which included accommodation, travel and food, accounted for half of reduced spending in the highest income households, compared with just a third for the lowest income households.

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U.S. equity funds face outflows on growth concerns -Lipper

Brief: U.S. equity funds faced an outflow in the week to Sept. 8, on concerns the spread of the Delta coronavirus variant could slow economic growth and uncertainty over the timeline for the Federal Reserve to pull back its accommodative policies. Data from Lipper showed U.S. equity funds faced an outflow of $1.85 billion in the week to Wednesday, compared with an inflow worth $11.18 billion in the previous week. Investors also assessed data that showed the U.S economy created the fewest jobs in seven month in August, which affected risk sentiment. U.S. equity growth funds faced net selling of $4.72 billion, their biggest outflow in seven weeks, while value funds saw outflows for a third straight week, worth a net $541 million. Among equity sector funds, real estate funds lured a net $2.29 billion, the biggest since at least mid-October 2019. However, financials, industrials and materials sectors faced outflows of $1.05 billion, $857 million and $512 million respectively.

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Wall Street Braced for ‘Far Stickier’ Inflation to Test Markets

Brief: Markets are on tenterhooks for critical U.S. inflation data that could buffet stocks and bonds if they shift expectations about Federal Reserve stimulus withdrawal and the timing of interest-rate hikes. A backdrop of slower reopening in pandemic-stricken economies due to the delta strain, and price pressures stoked by supply snarls led to declines in both global stocks and Treasuries last week. Some measures of producer prices released Friday topped expectations, with a gauge of final demand jumping 8.3% year-over-year amid persistent disruptions in supply. That’s coming against a backdrop of tenacious inflation concerns, with central banks pumping in stimulus, and inventory issues cropping up just as the labor market adjusts to a new reality of work. Here’s what some strategists and investors are saying now.

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Asset Managers Need a Tech Overhaul

Brief: Asset managers used to depend on in-person conversations to strike deals, but that’s no longer the case as managers and clients across the globe shift to remote work. That’s one reason 75 percent of asset managers showed a strong appetite for digital transformations, according to a recent survey from KPMG. KPMG got 1,300 global respondents to its survey, including 112 asset management CEOs. Of the U.S. participants, 63 percent were from private equity, 22 percent were brokers or financial advisors, 9 percent were from wealth managers, 3 percent were from hedge funds, and another 3 percent were multi-strategy alternative investors.

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Contact Castle Hall to discuss due diligence
 
Castle Hall has a range of due diligence solutions to support asset owners and managers as our industry collectively faces unheralded challenges. This is not a time for "gotcha" due diligence - rather this is a time where investors and asset managers can and should work together to share best practices and protect assets. Please contact us if you'd like to discuss any aspect of how Covid-19 may impact your business.

Our briefing for Friday, September 10, 2021:

  • In the United States, President Joe Biden has announced sweeping new measures to augment vaccination rates across the country. The new rules will apply to 100 million workers, or about two thirds of the American labour force. The administration will require all federal workers to get vaccinated, as well as all employers with 100 or more workers. Around 17 million workers at healthcare facilities will also be required to get vaccinated or test weekly for the virus. In his speech given on Thursday, Biden expressed growing frustration with the approximately 80 million unvaccinated Americans, saying that his “patience is wearing thin.”
  • In Canada, a new report from the Canadian Institute for Health Information shows that the average cost of treating a Covid-19 patient in Canada is more than $23,000. This is four times as much as a patient with influenza. Covid-19 patients are typically hospitalized for around 15 days which is twice as long as the standard pneumonia patient.  According to the data, almost one in four Covid-19 patients are admitted to the ICU, and one in five die in intensive care. The average cost of a Covid-19 patient admitted to the ICU is approximately $55,000, compared with $22,000 for an ICU-admitted pneumonia patient.
  • In the United Kingdom, over 8000 people were in the hospital with Covid-19 as of Wednesday, the highest number for nearly six months. The figure represents a 6% increase over the previous week. Despite this, numbers are still well below their peaks in January, when hospitalizations were hovering around 39,000. Cases have been slowly rising again in the U.K., reaching as high as 40,000 per day. The U.K. also has some of the highest vaccination rates in the world, with over 65% of the total population having had 2 doses.
  • In Italy, green pass requirements have been expanded to include all university and school staff, including cafeteria workers and cleaners. Prime Minister Mario Draghi said in a cabinet meeting that the decision was made to deal with the Covid-19 emergency in schools and other social facilities. Employees in those sectors will now have to show proof of vaccination, a negative Covid-19 test or proof of recent Covid-19 recovery, as per the green pass requirements. The rules are expected to be extended to state workers in the coming weeks, and eventually private sector workers. 
  • In New Zealand, Auckland reported 11 new cases of Covid-19, down from 13 the previous day and the lowest number of any day this week. This takes the total number of infections for the current outbreak to 879. Auckland remains under strict level four restrictions, while the rest of the country eased them earlier this week. The government will announce on Monday whether the lockdown in Auckland will be extended. New Zealand recently purchased about a quarter of a million doses of the Pfizer vaccine from Spain, which are expected to arrive this week and boost the country’s inoculation program.
  • In Australia, New South Wales (NSW) reported its highest number of new cases since the beginning of its latest outbreak, at 1542. Nine new deaths were also reported. State Premier Gladys Berejiklian announced that there will be no more daily media briefings as of Monday, updates will be provided through an online video instead. NSW is still aiming for 70% full vaccination rates before reopening, a target that is expected for mid-October. So far about 76% of adults in the state have had at least one dose of vaccine, while 44% are fully vaccinated.

Covid-19 – Due Diligence And Asset Management

BlackRock Rethinks October Return-to-Office Plan on Delta Risk

Brief: BlackRock Inc. is re-assessing its plans for U.S. employees to return to offices in early October, saying the spread of the Covid-19 delta variant calls for a more flexible approach. The world’s largest asset manager is now telling employees that it hasn’t decided when it would like to see them at their desks at least a few days a week, according to a memo seen by Bloomberg Thursday. The New York-based firm said it would give staff 30 days’ notice before moving to that hybrid work model.“We will be measured in our approach to return to the office,” executives including Chief Operating Officer Rob Goldstein said in the memo. “At this time, we are assessing our return-to-office plans for October and beyond.”

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ECB slows pace of pandemic stimulus programme but insists no tapering

Brief: The European Central Bank is set to slow the monthly bond purchases under its crisis programme as the economic outlook improves. "Based on a joint assessment of financing conditions and the inflation outlook, the Governing Council judges that favourable financing conditions can be maintained with a moderately lower pace of net asset purchases under the pandemic emergency purchase programme (PEPP) than in the previous two quarters," the ECB said this Thursday (9 September). While it will buy fewer bonds for the rest of the year the ECB stated it could increase its stimulus again if the eurozone outlook worsens. UBP macro strategist Mohammed Kazmi said the decision is in line with expectations. "There would have been some fears over a more hawkish announcement coming into today, taking purchases back to Q1 levels, especially after Lane's speech.

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U.K. Economy’s Coronavirus Rebound Grinds to a Halt in July

Brief: The U.K. economy barely grew in July, suggesting the recovery from the coronavirus recession is rapidly levelling off as consumer spending weakens and supply disruptions hamper production. Gross domestic product expanded just 0.1%  -- a tenth of the pace posted in June, the Office for National Statistics said Friday. Economists surveyed by Bloomberg had expected 0.5% growth. The figures left output 2.1% below the level in February 2020, before the pandemic struck. The slowdown heralds a return to more normal growth rates after pent-up demand following the lifting of restrictions in the spring saw the economy surge by almost 5% during the second quarter.

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TSX, U.S. markets fall on concerns about virus and Fed moves

Brief: North American stock markets were weaker for at least a third-straight day over concerns about the Delta variant and the potential scaling back of monetary stimulus in Canada and the U.S.Investors remained anxious about the impact of rising COVID-19 infections on economic growth and demand for commodities such as energy. A new pandemic low in first-time U.S. benefit claims also raised anticipation that the U.S. Federal Reserve might pull back its stimulus earlier than expected. The number of Americans seeking unemployment benefits fell last week to 310,000. That's below expectations and is approaching the pre-pandemic level of about 225,000. “Because things are mending on the labour front, the U.S. Federal Reserve could move sooner than anticipated to scale back some of its COVID pandemic accommodative monetary policies,'' said Anish Chopra, managing director with Portfolio Management Corp.

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Airlines lower forecasts, blaming rising Covid cases for weaker travel demand

Brief: Several U.S. airlines on Thursday lowered their financial forecasts, citing weaker bookings amid a rise in Covid-19 cases in recent weeks. United Airlines said weaker revenue will mean adjusted pretax losses in the third and fourth quarters of this year. The Chicago-based carrier said in July it expected to post pretax profits for that period. It plans to further trim capacity this year because of weaker demand. United said the spike in Covid cases over the summer, however, has had less of an impact on demand than previous increases in infection rates. Air travel generally falls in late summer as schools reopen, but airline executives in recent weeks have warned that the fast-spreading delta variant has exacerbated the drop in demand.

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Contact Castle Hall to discuss due diligence
 
Castle Hall has a range of due diligence solutions to support asset owners and managers as our industry collectively faces unheralded challenges. This is not a time for "gotcha" due diligence - rather this is a time where investors and asset managers can and should work together to share best practices and protect assets. Please contact us if you'd like to discuss any aspect of how Covid-19 may impact your business.

Our briefing for Thursday, September 9, 2021:

  • In the United States, children are being hospitalized for Covid-19 at alarming rates, just as schools reopen and temperatures drop. The latest available data from the U.S. Department of Health and Human Services shows that 2396 children were hospitalized with the virus as of Tuesday, a record high. According to the American Academy of Pediatrics, children now make up more than 26% of new Covid-19 cases in the U.S. Many of the children being hospitalized had no pre-existing conditions. Experts say it’s important to protect children from the delta variant, to prevent further spread and to maintain classroom learning.
  • In Canada, a new online poll suggests that support has increased in Alberta for vaccine passports, despite the province’s premier opposing them. In Alberta, 54% of people who responded to the survey support mandatory proof of vaccination for public activities. While several provinces, including British Columbia, Ontario, Quebec and now Nova Scotia, have opted to bring in vaccine passports, Alberta Premier Jason Kenney maintains that they would interfere with the province’s Health Information Act. He instead announced last Friday that he would offer $100 incentives to help encourage people to get vaccinated.
  • In the United Kingdom, the Joint Committee on Vaccination and Immunisation (JCVI) is scheduled to meet to make a decision about the Covid-19 booster program. A week ago, the JCVI approved boosters for people with weakened immune systems, but this is separate from a formal booster program.  The leader of the World Health Organization (WHO), Director-General Tedros Adhanom Ghebreyesus, is calling for another moratorium on booster shots, this time through to the end of the year. “A month ago, I called for a global moratorium on booster doses, at least until the end of September to prioritize vaccinating the most at risk people around the world who are yet to receive their first dose,” Tedros said. “There has been little change in the global situation since then.”
  • In South Korea, the government is concerned about eroding vigilance as the country deals with a surge in cases. According to Korea’s Disease Control and Prevention Agency (KDCA), Seoul reported more than 2100 new infections in the past 24 hours. Despite the rise in case numbers, officials announced on Wednesday plans to lift restrictions and reopen once enough people have been vaccinated. The health ministry said with the current vaccination levels, the target of 80% will likely be hit in late October.  As of Tuesday, about 42.6% of adults in South Korea had been fully vaccinated.
  • In Japan, authorities have extended a state of emergency in Tokyo and other regions until the end of this month. The extension is intended to help avoid hospitals becoming overwhelmed, despite the fact that cases are falling and vaccinations are rising. "Inoculation of all those who wish to be vaccinated will be completed in October or November," Prime Minister Yoshihide Suga told reporters. "And from then, we will be able to ease restrictions by using proof of vaccination or testing results." Japan’s emergency restrictions are based around restaurants closing early and not serving alcohol. 
  • In Australia, New South Wales (NSW) unveiled its reopening plan, with the lockdown expected to ease next month provided enough people are vaccinated. State Premier Gladys Berejiklian did not provide a date for the reopening but said it would happen the first Monday after the 70% vaccination target is reached. Right now, about 43% of adults in NSW are fully vaccinated while 75% have had at least one dose. NSW reported 1405 new Covid-19 cases and five new deaths, while neighbouring Victoria state reported 324 new cases, its highest figure since August 2020.

Covid-19 – Due Diligence And Asset Management

The Pandemic Has Made Europe’s Top Executives Smarter… and Humbler

Brief: As the world slowly begins to shake off the unprecedented effects of the Covid-19 pandemic, corporate executives around the globe have been forced to grapple with challenges that even the most forward-thinking business leaders couldn’t have imagined just two short years ago. For many of the top-scoring chief executives in Institutional Investor’s 2021 All-Europe Executive Team, supply-chain issues top the list. “Supply chains around the world are in significant disarray,” said Nestlé’s Ulf Mark Schneider, the top-ranked chief executive in the food sector. “The consequences are rising raw material and freight costs.” Schneider said that the secret to overcoming these issues — and coping with an uncertain geopolitical environment — lies in increased agility and flexibility. For him, that’s not about knowing all the answers, but knowing he can delegate decisions to those who do: “We rely strongly on our people in the markets to know the best way to deliver for consumers, the company and society.”

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Wall Street turns higher after jobless claims hit new pandemic-era low

Brief: Stocks rose on Thursday, with Wall Street hoping to stave off a 4th consecutive day off losses as investors struggle to reconcile a still hot jobs market with an economy that's had its momentum dented by soaring COVID-19 infections. On Wednesday, the Dow Jones Industrial Average and S&P 500 Index posted their 3rd consecutive day of losses, and the technology-laced Nasdaq fell for the first time since last week. The market has mostly taken disappointing news in stride, but August's jobs data falling far short of market expectations last week tempered hopes for the fourth quarter.Separately, however, Labor Department data showed that open jobs hit yet another series record, with workers quitting their jobs en masse, and nearly 11 million positions unfilled. On Thursday, new jobless claims set a new pandemic era low at 310,000, temporarily allaying fears about the economy.

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Goldman Sachs Ends Social Distancing, Free Food in London Office

Brief: Goldman Sachs Group Inc. is dropping social distancing rules in its London office and will return to full occupancy starting next week. With the “vast majority” of staff in the U.K. fully vaccinated, Goldman is already seeing about half of its London workers in the office each day, according to an internal memo seen by Bloomberg News. “We encourage those of you who have not yet had the opportunity to be in the office to speak to your manager about doing so,” the memo said. The bank will keep mask wearing in common areas and a mandatory testing program in place. Goldman is also ending free meals in the office from Sept. 20 “ to encourage support of the local restaurants and businesses reopening around us.” The move was first reported by Financial News.

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Deep Dive: Absolute return managers adjust to the 'pandemic paradigm'

Brief: In 1837 Hans Christian Andersen wrote a folktale entitled The Emperor's New Clothes which always seems to come to the forefront when modern day markets' behaviour deviates from academic investment reason. Since March of 2020, when markets reeled from the pending pandemic effect on global economies, world governments have used record amounts of monetary and fiscal stimulus to attempt to shore up the world economy. While market crises have largely been avoided, the sheer size of the coordinated effort has led asset prices to surge, in some cases diverging from any fundamental valuation, at least relative to historical levels/multiples. 

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Muni-Bond Ratings Hit as Delta Derails Tourism Industry Revival

Brief: The persistence of the pandemic is dealing a fresh financial hit to corners of the municipal-bond market. As the strength of the tourism revival is restrained by the surge in the delta variant, S&P Global Ratings this month downgraded bonds partly backed by hotel-room revenue in Anaheim, California, the home of Disneyland. Bonds issued for New York’s Jacob K. Javits Convention Center had their rating cut by Moody’s Investors Service, with the trade association business plunged back into uncertainty. And Fitch Ratings knocked down its grade of the subway system serving San Francisco, the tech industry hub where companies have been kicking back the timeline for returning to the office.“Whether you take a vacation is one of the most discretionary choices you have,” said Dora Lee, director of research at Belle Haven Investments, which oversees $15.4 billion in investments.

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Contact Castle Hall to discuss due diligence
 
Castle Hall has a range of due diligence solutions to support asset owners and managers as our industry collectively faces unheralded challenges. This is not a time for "gotcha" due diligence - rather this is a time where investors and asset managers can and should work together to share best practices and protect assets. Please contact us if you'd like to discuss any aspect of how Covid-19 may impact your business.

Our briefing for Wednesday, September 8, 2021:

  • In the United States, President Joe Biden will make an announcement outlining a new six-point strategy for dealing with Covid-19 and the delta variant. The announcement will come on Thursday, the White House said, and will address important matters like rising case numbers and vaccine hesitancy. Over the holiday weekend, the U.S. reached 40 million cases of the virus, the highest tally in the world.  Hospitalizations have also increased and seven states–Alaska, Georgia, Hawaii, Idaho, Kentucky, Tennessee and Washington–reported record numbers this month. The U.S. is struggling to keep the delta variant under control as concerns grow around children heading back to school.
  • In Canada, British Columbia has officially launched their vaccine passport for residents to access non-essential services.  Premier John Horgan says the new system will help get the economy running and allow social events to return safely. The new rules come into effect on Sept.13 and will apply to fully and partially vaccinated people until Oct. 24. Beginning on Oct. 24, residents will have to be fully vaccinated in order to access those non-essential services. British Columbia joins provinces of Quebec, Ontario and Manitoba in launching similar programs to try and augment vaccination rates. 
  • In the United Kingdom, Prime Minister Boris Johnson laid out plans on Tuesday to raise taxes to fund health and social care, after spending billions on the coronavirus pandemic. The tax on workers and companies across England would be a 1.25% levy, which is expected to generate about $62 billion over three years, according to the government. Speaking in the House of Commons on Tuesday, Johnson said it would be “wrong for me to say that we can pay for this pandemic without taking the difficult but responsible decisions about how we finance it.” In July, government reports said the U.K’s Covid-19 spending was around the equivalent of nearly $648 billion. 
  • In France, the government’s “pass sanitaire” was introduced about a month ago on August 9. The pass makes it mandatory to provide vaccination status or show a negative test, in order to enter indoor restaurants, cinemas, shopping malls, or for travel on planes and trains. Since the pass was introduced, vaccination rates in France have gone up. Approximately 72% of the French population had received one dose of vaccine by August 30, compared to 53.6% on July 12 when the pass was announced. More than one million people booked their vaccine appointments the day after President Emmanuel Macron announced the policy.
  • In Germany, the health minister is urging more people to get vaccinated, as vaccination rates fall and case numbers rise. Health Minister Jens Spahn tweeted on Saturday that at least 5 million vaccinations are needed to make the autumn and winter safer. The minister warned of hospitals becoming overwhelmed if not enough people are vaccinated. For weeks, case numbers have been rising in the country and vaccination rates have been falling. Currently about 61% of the German population has been fully vaccinated, a rate lower than most other European countries.
  • In Australia, vaccinations are accelerating as the country deals with lockdowns in its two biggest cities. Around three quarters of people over the age of 16 in New South Wales (NSW) have now had their first dose of vaccine. NSW reported 1480 new cases, up from 1220 a day earlier, and nine further deaths. In neighbouring Victoria state, cases fell from 246 to 221. The country now aims to live with the virus instead of eliminating it, with restrictions to lift once 70% of the adult population has been fully vaccinated, a goal that’s predicted for mid-October.

Covid-19 – Due Diligence And Asset Management

U.S. Stocks Cut to Underweight at Morgan Stanley on Higher Risk

Brief: Morgan Stanley cut its recommendation on U.S. equities to underweight and its call on global stocks to equal-weight, citing “outsized risk” to growth through October. Rising cases of the delta strain of Covid-19, and tension between elevated inflation expectations and low yields and easy monetary policy are at play during a time “that has historically poor seasonality,” strategists including Andrew Sheets wrote in a note on Tuesday. The investment bank’s caution on U.S. equities comes as the S&P 500 Index has outperformed global equities this year to make new records, even as coronavirus infections have started rising again in many parts of the world, and as the U.S. Federal Reserve edges closer to setting a path toward tapering stimulus. 

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European Equity Research Has Changed — ‘And That’s a Good Thing’

Brief: More than a year and half since the Covid-19 pandemic plunged Europe into lockdown and ushered the equity research industry into a virtual environment, there are some changes on the near horizon. The region’s vaccine effort — sluggish at first — has now reached 70 percent of adults in Europe, according to European Union officials, and the end of the summer signals a return to the office for many employees, despite the looming Delta variant. This shift is poised to recalibrate the industry and its relationships once again — and finding the right balance for both research teams and their institutional investor clients will be key.

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Dow, S&P 500 drop, tech stocks notch gains as Delta variant clouds gather

Brief: Stocks fell on Tuesday, with Wall Street indices retreating from last week's record highs, with analysts closely watching the labor market as rising COVID-19 infections cloud the outlook. Last week, the S&P 500 Index set an all-time high, and the Nasdaq Composite briefly hitting an intraday record, despite August's jobs data falling far short of market expectations. While payrolls showed the economy creating a relatively slim 235,000 new positions, the data stoked speculation that the Federal Reserve's Open Market Committee (FOMC) could alter its timetable for scaling back its stimulative bond-buying, which has propped up investor confidence.On balance, we expect the September FOMC statement to confirm the July minutes that tapering can begin later this year," wrote Marc Chandler, chief market strategist at Bannockburn Global Forex, in a morning research note.

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European Stocks Slip as Investors Mull ECB Stimulus, Inflation

Brief: European equities fell Tuesday as investors assessed how soon pandemic stimulus could potentially be withdrawn and the effects of rising inflation. The Stoxx Europe 600 Index was 0.5% lower by the close in London, weighed down by chemicals, health-care and utilities shares. Luxury shares outperformed, with Switzerland’s Swatch Group AG and Gucci-owner Kering SA gaining after Hong Kong moved toward reopening the border with China. European stocks are hovering near a record high reached mid-August on the back of strong corporate earnings and economic growth potential. But the focus has now shifted to the risks of inflation and monetary policy, with investors awaiting the European Central Bank meeting on Thursday for clues on how soon it will move dial down emergency stimulus.

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Deutsche Bank Calls End of Honeymoon Phase With Remote Work

Brief: Deutsche Bank AG is calling the end of the honeymoon phase for employees’ relationship with remote work. A growing number of workers report feeling isolated from colleagues, Deutsche Bank said in a report to clients. Women are increasingly likely to develop musculoskeletal problems due to inadequate remote-work setups. Nearly 40% of workers in the U.S. say they feel exhausted after a full week of virtual meetings. “Despite our initial honeymoon, people are starting to realize that the freedom of work-from-home does have some downsides: dilution of company culture, coordination issues, and even the mental wellbeing of some workers,” Marion Laboure, an analyst at Deutsche Bank, said in the report.

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Contact Castle Hall to discuss due diligence
 
Castle Hall has a range of due diligence solutions to support asset owners and managers as our industry collectively faces unheralded challenges. This is not a time for "gotcha" due diligence - rather this is a time where investors and asset managers can and should work together to share best practices and protect assets. Please contact us if you'd like to discuss any aspect of how Covid-19 may impact your business.

Our briefing for Tuesday, September 7, 2021:

  • In the United States, boosters are still set to become available by Sept. 20, but Pfizer jabs will likely be available before Moderna. According to Dr. Anthony Fauci, U.S. top infectious disease expert, Pfizer has submitted all the necessary information to the U.S. Food and Drug Administration (FDA), but Moderna is still a little bit behind in the process. Fauci says he hopes both vaccines will be available for the booster rollout in late September, but if Moderna fails to complete the process in time then the Moderna doses will be given later.
  • In Canada, new rules for international travellers have officially come into effect. As the Government of Canada’s border reopening plan enters its latest phase, fully vaccinated international travellers no longer need to quarantine for 14 days upon arrival. Travellers must show proof of full vaccination received at least 14 days prior to entry, or a negative Covid-19 test taken no more than 72 hours prior to their scheduled flight or border crossing. Travellers must also be asymptomatic and must upload all their documentation through the ArriveCAN app or website within 72 hours before their arrival.
  • In the United Kingdom, vaccine passports will be needed for entry to nightclubs and similarly crowded indoor venues, the vaccines minister has confirmed. On Sunday Nadhim Zahawi told British media that nightclub visitors will have to prove their vaccination status via the passport, by the end of this month. Zahawi says the passports are the best way to keep the economy open, and that the government is working closely with the industry to help ensure the venues can be opened safely. The vaccine passport rules will only apply in England.
  • Japan’s Prime Minister Yoshihide Suga will not run in the governing party’s leadership elections this month, creating space for a new leader to become the country’s prime minister. Suga has been widely criticized for his handling of the coronavirus pandemic and for pushing ahead with the Tokyo Olympics despite objections from health experts. Suga said his decision to step down was based on the desire to focus more on the pandemic. "As I was planning to run for the presidency, when I thought about the coronavirus measures and also campaigning, I realized a great deal of energy would be needed, that I cannot have it both ways and that I must choose one or the other," he said. 
  • In New Zealand, Covid-19 lockdown measures will be eased across the country with the exception of Auckland.  Auckland has remained the epicentre of the outbreak, and so the city will stay in a full lockdown until at least Sept. 14. Prime Minister Jacinda Ardern says her government will continue to pursue an elimination strategy. "We are within sight of elimination, but we can't drop the ball," Ardern said at a news conference. "Day by day we are making very good progress. What I don’t want to do is move too quickly and then see a resurgence."
  • In Australia, New South Wales (NSW) Premier Gladys Berejiklian says hospitals will be under the most pressure in the coming weeks. Berejiklian says the government’s modelling shows daily cases in Sydney’s worst-affected suburbs are expected to rise to as high as 2000 until the middle of the month. "If too many of us do the wrong thing, (if) there are too many super-spreading events, we could see those numbers higher," Berejiklian said during a media briefing. NSW reported a total of 1281 new cases on Monday, down from 1485 a day earlier.

Covid-19 – Due Diligence And Asset Management

Active funds ride the post-vaccine wave while appetite for index funds slow, says Calastone

Brief: A strong month for equity funds saw inflows rise to GBP1.3 billion in August, according to the latest Fund Flow Index (FFI) from global finds network Calastone. Since the sea change in sentiment towards equity funds that accompanied the announcement of successful clinical trials of Pfizer’s, Moderna’s and AstraZeneca’s Covid-19 vaccines in November 2020, investors have added GBP17.2 billion to their equity holdings. This means more than a third of the net inflows to equity funds (35 per cent) since 2015 has taken place in the last ten months alone. Global funds saw the largest net inflows in August (GBP1.1 billion), much of this targeted at ESG offerings. Most other categories saw only modest inflows, though funds focused on UK equities, equity income and Asia-Pacific all suffered outflows.

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Postponing a Return to Office Gets Companies Nowhere

Brief: The planned autumn 2021 return to the office is being delayed. Until January, purportedly. That’s when Apple Inc., Amazon.com Inc., Facebook Inc., Alphabet Inc. subsidiary Google, Microsoft Corp. and some other major employers of knowledge workers now say they expect people back at their desks, 22 months after sending everybody home at the outset of the Covid-19 pandemic. Given the current high U.S. levels of Covid cases, hospitalizations and in some places deaths, it’s understandable that companies don’t want to do a big return-to-office right now. Less clear is why they all thought early fall would be such a great time for RTO in the first place, or why they think the coast will be so much clearer in January.

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Wall Street falls on worries over slowing economic recovery

Brief: The Dow Jones and S&P 500 fell on Tuesday, as worries over the slowing pace of economic recovery overshadowed hopes that the Federal Reserve would maintain its accommodative stance a little longer after a soft U.S. payrolls report. Amgen Inc and Merck & Co dropped about 2.5% each as the drugmakers dragged down the Dow Jones index, after Morgan Stanley cut its rating on the stocks to "equal-weight" from "overweight". Industrial heavyweight Boeing Co also slipped 1.9% after Ireland's Ryanair said it had ended talks with the planemaker over a purchase of 737 MAX 10 jets worth tens of billions of dollars due to differences over price. Ten out of eleven sub-indexes fell in early trading with economy-sensitive sectors like industrials, real estate and materials leading declines.

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UK M&A deals continue to rebound after pandemic

Brief: The total value of mergers and acquisition (M&A) activity taking place across the UK has gone up significantly in the second quarter of 2021 compared to the first, as lockdown restrictions eased, government data has revealed.According to the Office for National Statistics (ONS), the total value of inward M&A — foreign companies abroad acquiring UK companies — was £27.7bn ($38bn) in Q2, £19.4bn more than the previous quarter. The value of domestic M&A — UK companies acquiring other UK companies — was £10.6bn in Q2, an increase of £6.1bn.Two notable domestic acquisitions were National Grid's (NG.L) £8bn acquisition of British firm Western Power Distribution; and water giant Pennon Group (PNN.L) buying the company behind Bristol Water from its US, European and Japanese owners for £425m.

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Post-Pandemic Economic Puzzle Widens to ‘Phantom Menace’ Rate

Brief: Global central bankers trying to gauge the threat posed by surging inflation have another puzzle to solve too: whether the pandemic has shifted their policy bearings. The disruption caused by Covid-19 has been so extensive that economists including Kristin Forbes at the Massachusetts Institute of Technology are now wondering if one repercussion could be an increase in advanced economies’ neutral level of interest rate -- the setting at which growth is neither stimulated nor constricted. If that equilibrium point -- sometimes called R* -- has drifted higher, that would mean central banks’ already ultra-easy monetary policy is looser than generally thought.While that offers the prospect that officials may need to repeatedly raise interest rates in due course to brake the economy, it also holds the risk that they misjudge how stimulative their stance is. Such a policy error could open the door to an enduring bout of inflation.

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Contact Castle Hall to discuss due diligence
 
Castle Hall has a range of due diligence solutions to support asset owners and managers as our industry collectively faces unheralded challenges. This is not a time for "gotcha" due diligence - rather this is a time where investors and asset managers can and should work together to share best practices and protect assets. Please contact us if you'd like to discuss any aspect of how Covid-19 may impact your business.