September 25, 2020
Making Cents of the Markets
New episode of Ready.Set.Retire! Listen to Lori and Jon discuss how covid has changed our lives – especially those in retirement or about to be. Also, tune in to hear about Jon’s exciting new adventure in podcasting! Check it out here.
Listen to this week’s Making Cents of the Markets on CKNW where we discuss how the upcoming elections may affect the markets and how to simplify your life in retirement! Listen here.
Be in the Know
North American markets continued to head lower in a choppy fashion as they finished the week down 0.8% which was the fourth consecutive week where indices closed lower. We believe that the main reason behind the latest negative bias has been the fading confidence that another coronavirus stimulus package will occur before the US election. Democrats are currently assembling a new $2.4 trillion proposal that is expected to go to a vote next week as investors remain hopeful that common ground is found at a time where many Americans need additional assistance.
This week’s focus was on Prime Minister Trudeau’s throne speech this past Wednesday as he outlined the government strategy moving forward and announced an extension of wage subsidies until next summer along with a pledge to create over one million jobs. Liberals plan to create these jobs through direct investments in the social sector and infrastructure. In short, the Liberals are not expected to tackle deficits anytime soon which likely assisted the latest weakening of the Canadian dollar (vs. USD).
Economic data was relatively light this week as we saw Canadian housing prices increase another 0.5% in August as pent up demand has supported near-term price increases. While this has been positive, a recent report by Moody’s Analytics forecasts a decline in 2021 due to affordability issues in Vancouver and Toronto and oversupply issues in Calgary and Edmonton. The latest US manufacturing data showed that business activity continues to improve but the pace of improvement has started to slow as businesses await clarity with respect to both the pandemic and the election. Next week economic data will pick up steam with a Canadian GDP reading for July and the latest on the US employment picture.
Our portfolios once again held up quite well this week as they were relatively flat in the face of the latest volatility and weakness. Despite some strength at the end of the week, we remain conservatively positioned as uncertainties remain elevated around a resurgence in COVID cases, US stimulus bill delays, and the upcoming US election on November 3rd. We believe that patience will be rewarded as volatility in election years typically does not subside until after the result though we realize that there are potential positive catalysts that include vaccine developments and a stimulus bill out of the US.
Our equity exposures are still well below our target allocations as we value defensive exposures such as cash, bonds, and gold more at this juncture in the markets. We remain active as we continue to re-allocate exposures within our portfolios towards market leaders that have pulled back and are expected to continue to do well for years to come. We cannot forecast or predict when markets will turn and head higher but are prepared to invest more into markets once we see some certainty and strength.
Chart of the Week
As the election is fast approaching, we wanted to share the historical performance of the Dow Jones Industrial Index in election years over the last 100+ years. In the chart below, one can see that markets tend to do better prior to and after the election when the current party stays in power whereas the market tends to be more volatile when a new party takes over:
Thus far the market looks like the average of most election years so it isn’t telling of the potential result. The polls favor Biden now but as we know from the last US election, one should not trust the polls as anything can happen. We agree with this analysis though as the largest risk for the market may be if the Democrats win and sweep to take control of Congress, the Senate, and the White House as we would expect tax rates to increase though time will tell.
Beyond the Markets
The beginning of Fall means plenty of Fall activities to do around Metro Vancouver! Mann Farms is the go-to destination for such activities as they are currently hosting their Fall Festival! From now until November 2nd come down for pumpkin patches, kettle corn, and caramel apples galore. The festival will also feature corn mazes, including the Scariest Corn Maze in Canada as well wagon rides through the farm! Click here to learn more.
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