October 2023 - Monthly Update
Kaitlyn Richardson - Oct 01, 2023
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Hope this note finds you and your family well.
Your portfolio was down in September. It remains with positive performance over the past 12 months.
North American economies have shown remarkable resilience in the face of global economic uncertainties. Lead by an economy in the United States (U.S.) that continued to witness steady growth, driven by a combination of robust consumer spending, corporate profitability, and a stabilizing monetary policy environment.
The U.S. economy remains a pillar of stability, with strong GDP growth, declining unemployment rates and healthy consumer sentiment. The Federal Reserve continues to monitor inflation, but overall, the economic outlook remains positive.
Investment markets continue to establish a consensus around the level of long-term interest rates. The price of 10 year government bonds adjusted lower during the month to reflect market expectations around higher long term interest rates trending towards 5%. This emerging trend of long-term interest rates stabilizing above the rate of inflation reflects a growing expectation of real and enduring economic growth for the U.S. economy.
Stock markets had a bumpy downward bias in September as they continued to consolidate gains from earlier in the year. The Canadian stock market remains stuck in neutral this year as foreign capital continues to leave our economy. Once this short-term trend runs its course, we expect Canadian stocks to stabilize and follow U.S. stocks higher.
The next round of quarterly earnings is just beginning. We expect the results to be ahead of expectations with guidance to the upside and in line with a stronger than expected U.S. economy and job market.
Our expectations are realistic and constructive on the longevity and duration of the current cycle of growth.
You and your investments are in a strong position.
The view from Brian Belski, BMO's Chief Investment Strategist:
“Unfortunately, US stocks were unable to rebound from their August swoon last month… which made September live up to its “traditional worst month of the year” moniker. Following this two-month loss, the S&P 500 is down… from its July close, but still managed to finish 3Q with the index gaining. The sharp jump in interest rates was clearly the culprit as the 10-year Treasury yield rose 50 bps, its largest monthly increase in a year, pushing it to the highest level since 2007. While the interest rate debate is unlikely to go away anytime soon, we believe performance patterns this year still suggest that a 4Q rally is in store. According to our analysis, there have been 28 years since 1950 where the S&P 500 gained at least 10% through 3Q and during those years the average 4Q gain was 4.1%. In fact, only five saw 4Q losses and when excluding the 1987 black swan the loss was only marginal at 0.7% on average… The S&P/TSX declined… in September, slightly outperforming the S&P 500 for the second month in a row. However, the TSX is now up [slightly] year-to-date, underperforming the S&P 500 by the largest spread since 2015. Despite this sharp underperformance, our view on Canada has not changed. We continue to believe Canada is a clear cross-section of growth, value, and income, which we believe makes Canadian equities a key area of multi-year relative stability. While the TSX may continue to “chop around” during the final months of 2023, we believe as interest rates AND recession fears fade, so too will concern around earnings, providing the key catalyst for valuation expansion and broadening of market performance.”
Stocks in your portfolio that made a new 52 week high this past month:
Accenture*, Mastercard*
Stocks in your portfolio that made a new 52 week low this past month:
Bristol-Myers*, CN Rail*, Kraft Heinz*, Royal Bank*, Telus*, United Parcel Service*
The Loonie declined by half a cent versus the U.S. dollar to:
$0.735
Thank you,
Ian, Gab, Kaitlyn & Nataliia