Market Commentary

Making Cents of the Markets

Listen now to the most recent Making Cents of the Markets on CKNW. We talked about markets moving higher as the uncertainty surrounding the midterm elections settles. We also discussed tech layoffs, inflation, and why gold is surging!

We also provide tips on how to build a successful relationship with your financial advisor!

Click here to listen.

Our team is on a roll! Lori has been recognized as one of Canada’s Top Wealth Advisors- Best in Province. The Globe and Mail and Shook research awarded elite advisors who continue to excel in the financial industry.

“This achievement would not be possible without the collaborative effort of my team. Together, we ensure that we go above and beyond for all of our clients and ensure we exceed their expectations.” – Lori

Check it out here!

Beyond the Markets

Remembrance Day

As tomorrow marks Remembrance Day, there are many ways you can pay your respects to remember the individuals who fought in the First and Second World Wars.

Click here to see a list of all places where ceremonies are being held in the lower mainland.

Be in the Know

“Fall down seven times, get up eight.” – Japanese proverb

8.9 on the Richter scale

Imagine pressurized tectonic plates threatening a massive earthquake. And then it actually happens.

The headline official CPI and core-CPI inflation readings finally – finally! – exhibited a major downward reading, one that exceeded consensus. CPI fell to 7.7% as core-CPI eased to a 6.3% year-over-year pace:

This easing of inflationary pressure pushed stocks dramatically higher on Thursday, with the worst-hit NASDAQ up over 7% on the day. Will the Fed finally take a less aggressive rate hike when they meet in December? The stock and bond markets now seem to think so.

A red tsunami? More like a ripple.

Polls and pundit predictions suggesting major Republican momentum were proven unreliable. The only Trump-endorsed candidate to win was the writing celebrity J.D. Vance while Ron DeSantis – who is expected to give Trump a serious challenge for POTUS in 2024 should Trump run – won decisively.

This is not to say Democrats have a lot to celebrate besides feeling relief. The Democrat politician John Fetterman ran an authentic campaign against his Republican counterpart celebrity Dr. Oz from New Jersey, who was far less relatable to Pennsylvania’s mostly blue-collar, centrist voters.

Partisan politics aside, history shows that after every U.S. midterm election since 1950, the S&P 500 has been higher 12 months later regardless of who is in charge. The move is stronger when the midterms result in a divided government, which appears to be what we will see once all of the votes are counted.

That’s cause for optimism for investors.

If you believe in EV, you believe in copper

Copper is said to be the metal with a PhD., in that it’s a proxy for the health of the world economy. The spot price is down by about a third from March’s peak as investors grew concerned of a looming recession, as well as China’s lockdowns (they represent half of the global demand).

But many of the world’s largest producers, as well as Goldman Sachs, are warning of a major supply shortfall within a few short years, as new supply growth is estimated to peak within two years. Many mines are maturing and struggling to produce at previous levels as grades fall and resources run down. “We’ll look back at 2022 and think, ‘Oops,’” said John LaForge, head of real asset strategy at Wells Fargo. “The market is just reflecting the immediate concerns. But if you really thought about the future, you can see the world is clearly changing. It’s going to be electrified, and it’s going to need a lot of copper.”

EV’s is the big story, as electric cars use about double the amount of copper or about 120 pounds per car. Upgrading power grids will also require a lot of copper wiring, as connecting wind and solar farms.

Also, some 400 pounds are used in a typical detached home.

But with copper prices down and inflation pushing up the cost to build new mines, many large producers have been mothballing projects, but these too will return as inflation cools down.

As Goldman Sachs summed it up nicely in three sentences: “No decarbonisation without copper. The green transition will support a surge in copper demand. The copper market is unprepared for this critical role.”

Our Strategy

Some people don’t like the cold, but markets seem to love it

With inflation cooling down for a fourth consecutive month, markets continue to climb swiftly off the lows and our portfolios keep pushing higher.

Patience is a virtue has very much been applicable this year, as we diligently added quality companies to our portfolios over the past few weeks that we felt were poised to lead in the recovery. With markets recently picking up steam, we began to see our patience materialize as some of our companies are up around 20% so far this week alone.

One of the leading sectors this week has been gold. Recall that we saw the upside potential on the horizon a week or two ago, when we already started to build our gold position. Accordingly, we were pleased to see that our due diligence and strategy got a nod from markets, as the yellow metal shot up 10% higher in the past week.

As we understand that this year’s environment has surely been choppy, we continue to keep a close eye on any changes in conditions and always keep a backup plan should things suddenly go the other way. However, we are excited to see our portfolios making solid moves as they head higher as market sentiment continues to improve.

 

Source: Y Charts

As an example of that, our Legacy portfolio held Caterpillar, the industrial equipment manufacturer, which beat analysts’ expectations by a long shot this week with their Q3 earnings results. The stock saw a solid move after the results and we decided to take profits and look for new opportunities with similar growth in other sectors as we feel industrials may not lead in 2023. Again, this is what active management is all about!

Looking forward to next week, we will be keeping a close eye on the Fed and their interest rate decision, set to be released on Wednesday. As noted above, many countries including Canada have already started to ease on their aggressive rate hike rhetoric, and we think that this could be a sign that we are closer to seeing the same from the Fed. In either case, we are always ready with a plan of action.

Visual of the Week

 

 

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.

 

CANACCORD GENUITY WEALTH MANAGEMENT IS A DIVISION OF CANACCORD GENUITY CORP., MEMBER-CANADIAN INVESTOR PROTECTION FUND AND THE INVESTMENT INDUSTRY REGULATORY ORGANIZATION OF CANADA