Market Commentary
September 9, 2022
Making Cents of the Markets
On this week’s episode of Ready.Set.Retire!, Lori and Jon discuss how to find a financial advisor that is a good fit for you.
Lori explains how to begin your search, what qualities to consider, and what red flags to watch out for!
Listen here or subscribe on Spotify, Apple Podcast, and Acast.
Listen now to the most recent Making Cents of the Markets on CKNW, where we discussed the markets after the expected interest rate hike by the Bank of Canada, the continuous inflation increases, and oil prices falling.
Also, Lori talks about the top qualities to look for in a financial advisor!
Click to listen here.
Beyond the Markets
The 11-day event kicked off on September 8th and will run until September 18th. The festival features over 70 acts with comedy, dance, and storytelling. There will also be an opportunity for guests to partake in workshops and interactive experiences too.
This year’s Fringe promises to be one of the most memorable as it takes over almost every theatre space available in and around Granville Island.
Click here to purchase tickets and find out more!
Be in the Know
“This is the precept by which I have lived: Prepare for the worst; expect the best, and take what comes.” – Hannah Arendt
Rate hike expectations become reality
This week, the Bank of Canada delivered another jumbo three-quarters of a point rate hike to 3.25%. This is the highest level for the bank’s rate since early 2008, the pre-financial crisis.
With inflation pressures running at decades high, Canada’s central bank is making sure to deliver the message that they are committed to bringing back price stability, nudging inflation to trend lower towards its 2-3% target. With the Bank of Canada now “bringing the heat”, tightening 300 basis points thus far in 2022 as the fastest rate hike pace since the mid-1990s, markets now seem to be catching the drift.
Along with exacerbating weakness in the real estate sector on the back of rising rates this year, the latest to show the impact has been the Canadian GDP. Just last week, the Canadian GDP for Q2 was released showing that the Canadian economy’s growth was slower than economists had expected. A weaker GDP here at home is also apparent in the preliminary estimates for July, which for the first month in six is showing a contraction.
Canada Monthly GDP Change
While the Bank surely has some ways to go in its efforts to bring back normalized price conditions, it does look like they are on the right track to attaining its objective rather quickly.
Markets during midterm election years
With a U.S. midterm election on the horizon on November 8th, we thought it is beneficial to remind ourselves of the typical market behavior during this unique time. History doesn’t repeat itself, but it often rhymes.
Midterm elections in the United States are elections that are to take place at the midway point of a presidential four-year cycle. All 435 seats in the House of Representatives and 35 of 100 seats in the Senate are up for grabs.
During midterm elections, the president’s party usually does poorly. Dating back to World War II, the President’s party has lost an average of 26 seats in the House and an average of 4 seats in the Senate.
Due to the uncertainty around midterm elections regarding the destiny of the path of leadership in the States, we tend to see heightened market volatility.
Still, we wanted to remind ourselves of the good news here, which is that normally even during midterm years, markets still finish the year strong with big end-of-the-year rallies. Better times are ahead and we will look to participate in the rally should it presents itself.
The rise of the King
Queen Elizabeth, Britain’s longest-reigning monarch, and the nation’s figurehead for seven decades died at her home in Scotland aged 96 on Thursday 8th of September.
Elizabeth became monarch at a time when Britain still retained much of its old empire. In the decades that followed, Elizabeth witnessed massive political change and social upheaval at home and abroad.
The legacy must go on and as noted on the family’s website, any new sovereign succeeds to the throne “as soon as his or her predecessor dies.” With Charles as the first in the line of succession, he now will take up the throne upon the death of his mother.
On Canadian soil, Queen Elizabeth’s face embellishes our coins, the $20 bill, and even some of our stamps. Typically when the monarch changes, the Canadian currency is updated to match. While there is no required timeline for the Canadian Mint to update currency, coins will slowly start entering the world with King Charles depicted on them, whereas the $20 bill will continue to honour Queen Elizabeth until a redesign is issued. As for the existing coins symbolizing the late Queen, those will stay in Canadian’s pockets indefinitely.
Source: Bank of Canada Museum
Our Strategy
If we had a dollar for every time we said active management
With August behind us, we were excited that our strategy has continued to provide important value in the face of volatility, as markets gave back some of their latest gains from the June lows.
Our active management and higher cash allocation have allowed us to stay one step ahead, as Legacy portfolios were only down 1% on average, while markets were down just shy of 4% for the month. This prior month goes to show how true active management sets performance apart in times of considerable market volatility.
Focusing on the right sectors and their leaders within our strategy has never been more fitting. For example, we hold discount retailer Dollarama, which has positively surprised analysts, beating sales and earnings expectations in their previous quarter’s earnings report. The dollar chain has been attracting a diversified customer base from all walks of life, as inflation bites household spending and consumers gravitate toward cheaper prices.
The company’s second-quarter profit rose to $193.5 million, from $146.2 million in the same quarter last year, as sales rose 18.2%. Dollarama has also upgraded its guidance and said the outlook looks bright, as sales are expected to grow into 2023 with demand constructive for everyday essentials.
We look forward to including more quality companies such as this in our mandates once we have confirmation that inflation is indeed headed lower. Next week will be an important one as US inflation data is set to be released on September 13th.
Visual of the Week
Source: Visual Capitalist
The comments and opinions expressed in this newsletter are solely the work of Pinkowski Wealth Management, not an official publication of Canaccord Genuity Corp., and may differ from the opinion of Canaccord Genuity Corp’s. Research Department. Accordingly, they should not be considered as representative of Canaccord Genuity Corp’s. beliefs, opinions or recommendations. All information is given as of the date appearing in this newsletter, is for general information only, does not constitute legal or tax advice, and the author Pinkowski Wealth Management does not assume any obligation to update it or to advise on further developments related. All information included herein has been compiled from sources believed to be reliable, but its accuracy and completeness is not guaranteed, nor in providing it do the author or Canaccord Genuity Corp. assume any liability.
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