September 2024 - Monthly Update
Nataliia Riabenko - Sep 01, 2024
Hope this note finds you and your family well.
Your portfolio maintained its positive performance of 2024 in August. It remains with steady gains over the last twelve months.
The last month has brought a continuation of the enduring trends we've been talking about for quite some time as well as the emergence of a few new trends that we have been expecting as this cycle of economic growth has continued to unfold.
The American economy is back to being the biggest and the best in the world by a wide margin. This trend is to continue and reflects present economic conditions that are good.
Overnight interest rates in Canada continue to move lower and consumer confidence is moving higher as a result.
Overnight interest rates in the United States (U.S.) are set to follow Canada’s and move lower on a multi year basis. Like Canada, we expect America consumer confidence to move higher towards the end of this year once rate cuts have occurred. A more confident consumer leads to more plans turning into actions and additional economic activity at the margin.
As far as emerging trends go, we have identified the following over the past few months:
- Corporate earnings are coming in ahead of expectations as a result of the investments businesses have been making in their own productive capacity and is leading to improved guidance for the year ahead
- In the U.S., there has been a broadening of positive participation within investment markets beyond the technology sector
- Canadian investment markets have also started to broadly move higher as reflected by bond-like stocks (Banks, Utilities, etc.) that are central to our economy. In our view, this is likely being driven by very attractive valuations, as well as an interest rate cycle and expectations for additional cuts right through the end of 2025
If investment markets do experience another period of short-term selling pressure and volatility within the wider longer cycle of growth, you can expect us to be careful buyers (just as we have been over the last twelve months).
The view from Brian Belski, BMO's Chief Investment Strategist:
“The S&P 500 gained … during August marking its fourth consecutive month of gains and finishing at another month-end record price. However, the gains were not without some drama. Following a series of relatively lackluster earnings reports in the second half of July and then a disappointing July jobs report in early August, US stocks were in risk-off mode… from 7/16 through 8/5. The weakness proved to be short-lived as more upbeat earnings reports and economic data helped to quell the long dormant recession fears that the previous data stoked earlier in the month. Looking ahead, we anticipate more of these price swings particularly as the market enters a notoriously weak seasonal period and the seemingly hyper focus on every macro data point, but we remain relatively optimistic for the rest of the year… While the S&P/TSX lagged the S&P 500 for the second month in a row on a Technology sector rebound, the TSX still managed to hit a new all-time high. Indeed, our work suggests sentiment is clearly shifting back to Canada, with a focus on the more value and yield intensive sectors. Although Technology was easily the best performing sector in August, the market also saw strong performance in more value areas like, Real Estate, Financials, and Communication Services. As we wrote about last month, while there has been some concern that recent market activity signals a more cautious and defensive rotation, we believe this is a misinterpretation of the recent outperformance of these more traditionally defensive sectors. From our perspective, this is a “Buy Canada” trade that is exhibiting improvement in overall equity market flows with a tilt toward oversold and interest sensitive areas, NOT a defensive rebalance. Overall, this positive broad-based, low dispersion of performance among TSX sectors is a positive sign that the market is beginning to see improving breadth and confidence in the fundamental backdrop of Canadian equities”
Stocks in your portfolio that made a new 52 week high this past month:
Fortis*, Royal Bank*, United Health*
Stocks in your portfolio that made a new 52 week low this past month:
United Parcel Service*
The Loonie eased half a cent versus the U.S. dollar to $0.745
We wish you and your family all our best.
Thank you,
Ian, Gab, Kaitlyn & Nataliia