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August Market Perspectives and WYNTK

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August 9, 2023

We’re nearing the end of the dog days of summer, which typically start in early July and last until mid-August.  From a market perspective, the dog days of summer are usually a period of inactivity where major market movements melt away into the summer only to resurface in September and October.

Monthly Market Developments

·                Stock markets continued to perform well in July, as the wall of rate hikes (which grew even higher during the month) seems to be successfully curbing inflation without overshadowing economic growth.

·                For those keeping score at home: 6 out of 7 months thus far have provided positive returns for equity markets.

·                Looking ahead, it is core inflation that seems to offer the most encouraging prospects for a slowdown. Conversely, several commodity prices are rebounding, while base effects will no longer be so favourable. In short, the exact opposite of last year’s trends.

·                Against this backdrop, chances are that North American central banks will keep rates unchanged at least for the remainder of 2023, that is, at their most restrictive level since the early 1980s according to estimates.

·                The U.S. economic environment looks like an ideal ‘soft landing’ scenario, and we can only hope it remains that way. However, history shows that it is, above all, prolonged exposure to high interest rate that is a source of risk.

·                Besides, if the substantial reserve of excess savings accumulated during the pandemic undeniably provided some protection to economic growth, a recent Fed study suggests that this cushion may have or close to being exhausted in the United States.

Click on the attached as we recap financial markets in July and discuss:

-           The Evolution of the Top Holdings in the S&P 500

-           After encouraging CPI reports in July both in Canada and the U.S - Could U.S. CPI Rise? And What is Driving Inflationary Pressure here in Canada?

-           China’s Economy Showing Signs of Underlying Weakness

-           U.S. Markets have Historically Displayed Resilience Despite Uncertainty

Regardless of where we are in the market cycle, it’s important to take a disciplined approach to investing and remaining focused on your long-term goals. This strategy helps you keep your emotions out of investing, typically buying high and selling low like many investors do. Ongoing monitoring, diversification, and reviewing your portfolio also ensures it remains on track.

Should you have any questions regarding your portfolio, please do not hesitate to contact my office as creating well educated and informed investors continues to be the hallmark of my practice.

Enjoy the read. Aaron Pedlar

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