September Update - Why do we hold on to cash?

Money is a tool. It's something that supports your life!

BANK OF CANADA CUTS KEY RATE AS EXPECTED TO 4.25%

The market expects THREE MORE 25 bp rate cuts in 2024, including today, which is one 25 bp cut at each of the remaining meetings in 2024. The main non-consensus view is for a 50 bp rate cut some time this year. Over the next 12 months the market has priced close to 150 bps of further rate cuts by the BoC (Bank of Canada), which would take the overnight rate to 3%.

In the United State, the Fed is almost certainly making its first rate cut this month with 25 bps being the minimum. At the moment, the market is expecting about 100 bps in cuts in the last three meetings of 2024, meaning one scheduled announcement should bring a 50 bps cut, or an unscheduled inter-meeting 25 bps cut. 

The market has also already priced in 200 bps of rate cuts within the next 12 months.

Planning Tip

Time for back to school! The big question on every parent and adult student's mind is "How do plan for it?" or "How do we pay for it?" 

Education saving is a long term investment into your children, and in turn, into the future. With the costs of education continuing to rise, it can be a stressful topic to think about at any age. 

Head over to our "New Baby" section of the "Reach Your Goals" tab to learn more about the Registered Education Savings Plan (RESP), or dive deeper with "Helping Your Children" to navigate how to assist your children with their own financial literacy.

You can also reach the end of this blog to read this month's planning topic in more detail!

Our Portfolio Management Approach

We hope you have had the chance to listen to a few of our podcasts. With the summer over, more episodes are in the works! We are always accepting questions from clients that we can go into further details about. Email Ashley at any time: ashley.nichols@nbpcd.com to submit your questions for the Financial 50 or the Quarterly Market Commentary with Stephen & Ken!

 

We believe that risk management is not a choice, but a necessity. No one can control how much downside the market provides during a correction, but we strive to control how much of the downside your account receives. Our team aims to avoid 60% or more of the decline in any significant market downturn. Without our process, there is a good chance you could experience 100% of the downside of the market. We will help you navigate the risks AND rewards of the market, so you can stop worrying about your money, and start living your life!

 

Transactions

At the end of August, we sold Dollar General on a poor earnings report and started an initial position in Johnson & Johnson. We also sold our positions in the QQQ and DBC and moved those proceeds into cash and a 2% position in the TLT (20 year treasury notes). This increased our cash to 24% and decreased our equities to 58%.

Why do we hold cash when we fell the markets are extended and risk reward is not in our favor?

The S&P 500's technical landscape presents both opportunities and challenges. We do not know what will happen next, nor does anyone else. Therefore, we suggest a regular diet of risk management and portfolio rebalancing to navigate periods of elevated uncertainty. 

Could we be wrong? Absolutely.

But what is worse?

Missing out temporarily on some additional short-term gains OR spending time getting back to even, which take away the opportunity to make money.

"Opportunities are made up far easier than lost capital." - Todd Harrison

Returns on our 60/40, 70/30 & 80/20 portfolios before fees:

Interesting Charts

Stephen takes time out of his day to peruse social media and articles of interest and likes to share the charts and infographics the he find beneficial and even a little educational for our clients. Ashley like to feature her "top choice" first!

Humans are all about controlling the environment around them. Our lives can seem very chaotic when we feel like we don't have our hand constantly on the steering wheel. However, we can't control everyone and everything around us - we can only control ourselves and how we respond to the world and people around us. Below is my favorite chart this month, outlining the importance of the mindfulness of control:

 

Technical Comments

https://www.brookstradingcourse.com/price-action-trading-blog/

• The August monthly S&P 500 candlestick was a bull bar closing near its high with a long tail below.
• Last month, we said that traders would see if the bears could create a strong bear bar in August or if the market would trade lower (as it did early in the month) but reverse to close with a long tail or a bull body by the end of the month. The odds slightly favor the pullback to be minor.
• The bulls got a strong rally starting in October in the form of a tight bull channel.
• They hope that the market has entered a broad bull channel phase which will last for many months.
• They want the current pullback to be sideways and shallow (filled with weak bear bars, bull bars, doji(s) and overlapping candlesticks).
• They want the pullback to form a higher low or a double bottom bull flag with the April 19 low, followed by a resumption of the broad bull channel.
• At the very least, they want a retest of the July 16 high, even if it forms a lower high.
• So far, the bulls got what they wanted.
• Next, they want a retest of the all-time high followed by a breakout with follow-through buying, resuming the broad bull channel.
• They want another leg up completing the wedge pattern with the first two legs being the March 21 and July 16 highs.
• The bears got a reversal from a higher high major trend reversal, a large wedge pattern (July 27, March 21, and Jul 16), and a micro wedge (May 23, June 28, and Jul 16).
• The selloff moved almost 10%. However, it lacked sustained follow-through selling.
• The bears see the current move as a retest of the all-time high and want a reversal from a lower high major trend reversal or a double top with the all-time high.
• Since August’s candlestick was a bull bar closing near its high with a long tail below, it is a buy signal bar for September.
• The market may gap up in September. Small gaps usually close early.
• The selloff in August likely has alleviated the prior overbought conditions.
• The market remains Always In Long.
• Odds slightly favor the market to trade at least a little higher in September.
• Traders will see if the bulls can create a strong retest of the all-time high followed by a breakout above.
• Or will the market trade slightly higher but stall around the all-time high area instead?

Planning

Most parents hope their children will pursue higher education - and for good reason. A post-secondary education can prepare your child for a fulfilling career and steer them on the path to a successful and rewarding life.

However, if adequate savings are not in place for post-secondary education, your child may graduate with the added stress of carrying significant student debt before they've even secured their first job.

Click here to read more on Education Planning for Your Child

Millennial Minute

Just like Eminem, NSYNC and the Beetlejuice franchise, I'm back! 

It's finally time to revisit my May Article regarding millennials and the increasing trend of homesteading. The summer has wrapped up, and I have my final thoughts and budget on the urban garden I planted this summer. Did I save any money? Was the investment of my time and resourced worth it? Are there ways to save money while building your urban garden getaway?

Click here to read more!

 

I also encourage you to read last month's article that covered the importance of estate planning - I share my real world experience with lost a loved one and the tasks that are left behind when you haven't planned your final wishes for family and/or executors to follow.