August 2023 - Monthly Update
Nataliia Riabenko - Aug 01, 2023
Listen Here:
It was another positive month for your investment portfolio. The stable and positive behaviour of investment markets continued through July.
This activity mirrors the economic trends and data we have been highlighting for much of 2023.
Various measures of inflation in North America are moderating and overall trending lower.
In the United States (U.S.), the pace of second quarter gross domestic product (G.D.P.) expansion accelerated. At nearly two and a half percent this was ahead of expectations. In turn, economists continue to revise lower their probability of a recession for the U.S. in 2024.
Activity in the U.S. housing sector is displaying a similarly positive trend while rents (a component of inflation) in the U.S. are moving lower (greater supply and competition).
Deflationary prices in China remain an emerging trend. This would continue to moderate prices on many goods in the U.S. and Canada in the months ahead.
Quarterly earnings have been ahead of expectations. There has been a significant decline in reference to "recession" by business leaders during their earnings announcements. Their outlook for the future is getting better, not worse.
Our investments are composed of a diverse selection of leading businesses focused on the domestic U.S. economy and North America.
The path ahead is never linear day to day. We remain realistic yet more and more constructive on the longevity of this cycle of growth for investment markets in North America.
The view from Brian Belski, BMO's Chief Investment Strategist:
“Following a very strong June performance, US stock market momentum remained relatively strong during July with the S&P 500 gaining and finishing the month within [five percent] of its all-time closing high. And although market breadth dipped slightly relative to June, it remained relatively strong with nearly half of S&P 500 stocks outperforming the index, which again was generally led by traditional cyclical areas, while mega-cap tech+ lagged slightly for the second consecutive month. As a result, the S&P 500 finished July slightly above our base year-end target... but many of our bull case assumptions... are becoming more credible leaving room for further gains, in our view. Nonetheless, we believe investors may have priced in a bit too much good news the past two months especially since market expectations and Fed rhetoric still seem to be at odds despite the apparent resiliency in macro and earnings data. So, while we remain cautiously optimistic, we would not be surprised if the market encounters some periods of weakness in the coming months. Against this backdrop, we continue to recommend a highly selective approach to portfolio decision making and would also urge investors to use any potential market dips as an opportunity to increase US stock exposure...Canadian Underperformance Continued in July… The S&P/TSX gained... in July, driven by a rebound in Energy, Financials and Materials, which were the only sectors to outperform in the month. Yes, July saw commodity prices and Canadian bank performance begin to stabilize, which is a longer-term positive for the TSX in our opinion. However, despite the strength of these big three sectors, the TSX still underperformed the S&P 500 as US Communication Services meaningfully outperformed both markets. Overall, we continue to believe increasing investor confidence, particularly within the big three sectors, will be key to a second half recovery in the TSX. As such, we are encouraged by recent outperformance of these three sectors, which we believe offer investors strong relative value and cash flow generation.”
Stocks in your portfolio that made a new 52 week high this past month:
Mastercard*, Microsoft*, S&P 500 Index
Stocks in your portfolio that made a new 52 week low this past month:
Bristol-Myers*, Telus*
The Loonie gained half a cent versus the U.S. dollar to:
$0.76
Thank you,
Ian, Gab, Kaitlyn & Nataliia