October 2022 - Monthly Update
Kaitlyn Richardson - Oct 01, 2022
Trust this note finds you and your family well as we look towards Halloween.
Your investment portfolio declined in September. It shows a small retraction/neutral performance over the past 12 months.
It continues to be a difficult market for stocks in general.
September unwound the remainder of the recovery from July to trend back to the lows of this year that were marked in June. Unlike June, there is far less volume behind the current period of selling pressure and far fewer companies making new yearly lows – both are good signs of a bottoming process well underway for North American stock markets.
Your portfolio continues to be insulated and performing well on a relative basis. Healthcare and consumer staple stocks as well as US treasury bills remain areas of strength. We also continue to hold high levels of cash equivalents – something we have been intentionally building all year.
Nothing has changed from a strategic point of view – the U.S. domestic economy is the foundation to build upon and corporate America remains the pillar of strength, stability and an incredible source of value and future gains.
Inflation remains high (~8%) yet it is not getting worse.
Central banks are not accelerating the pace of their overnight interest rate increases. We now have the first central bank (Australia) to raise rates less than expected in September.
Economic growth is slowing as expected; however, spending at the household and corporate level remains solid. The job market has begun to moderate but remains stronger than expected.
We remain careful and cautious in the short-term while constructive and confident in the medium-term.
Our investment strategy remains sound and continues to evolve to align with the enduring and positive trends that we have identified: Own a properly diversified group of high-quality U.S. and Canadian investments that pay dividends or interest. These are companies that are central to the economy with businesses that are finding ways to adapt and innovate in this uncertain time in our history. In moments like these, the calibre of leadership of the companies we own is critical to their expansion and becoming more central to the economy as the next cycle of growth unfolds.
Your investment portfolio remains in a strong position.
The view from Brian Belski, BMO’s Chief Investment Strategist:
“The S&P 500 plunged … in September, marking the biggest monthly loss for the index since March 2020 and worst September since 2002, and fell to a new bear market low in the process... A hotter-than-expected [Consumer Price Index] CPI report initially sparked the selloff with further price weakness driven by rising global interest rates, increased hard landing fears, tightening financial conditions, and geopolitical risk. Admittedly, the decline in US stocks since mid-August has been more severe and longer lasting than we had anticipated, and we are closely monitoring developments to see if changes to our S&P 500 year-end targets are warranted. That being said, we advise investors to stay calm and disciplined and refrain from going into panic mode amid this selloff. Yes, the market has been volatile, and the path of least resistance has largely been to the downside in recent weeks, but we continue to firmly believe that the S&P 500 will finish the year higher than current levels with Q3 earnings results potentially being a catalyst for a more sustained market rebound....The S&P/TSX declined… in September… Indeed, Canada was not immune from the global flight to safety trade in September… While we certainly remain bullish heading into year-end, we do believe the issues facing the market are unlikely to dissipate in the near term, and as such we expect this higher volatility backdrop to persist over the coming months. However, we believe this does NOT mean investors should position portfolios more defensively, but rather focus on areas of stability, value and income—three core characteristics of Canadian equities within global markets, according to our work. Overall, we believe Canadian investors should remain broadly more cyclical while focusing on areas with strong relative value and income growth potential.”
Stocks in your portfolio that made a new 52 week high this past month:
None
Stocks in your portfolio that made a new 52 week low this past month:
Accenture*, Fortis*, Kraft Heinz*, Mastercard*, Microsoft*, Qualcomm, S&P500 Index, Telus*, United Parcel Service*
The Loonie declined four cents versus the U.S. dollar to:
$0.72
Thank you and all our best,
Ian, Gab, Kaitlyn, & Nataliia