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September Market Perspectives and WYNTK

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September 17, 2023

August has historically been a weak-performing month for investors, and it once again lived up to its reputation. Here’s a summary of the main events that steered the markets:

Monthly market developments

• Equity markets ended August lower but remain positive YTD. U.S. indexes were pulled down by all sectors, the TSX by financials and global stocks over concerns about China’s economic recovery.

• U.S. and Canadian bond yields initially jumped after Fitch, a top 3 credit rating agency, downgraded the U.S., but started to fall back later in the month as positive employment and inflation data came in.

• Energy prices have been climbing since late June, with oil now up 25% and hovering above $US80 a barrel. This surge is mainly due to decreased supply orchestrated by Saudi Arabia and OPEC.

• The froth on the U.S. and Canadian job markets finally showed signs of retreating. This will be viewed positively by the Fed and Bank of Canada as they continue to engineer an economic slowdown.

• Nasdaq-listed Nvidia Corp. (NVDA) had another round of results that breezed past expectations, highlighting the sustained demand for its computer chip technology which is used to power AI applications.

• During August, over 90% of S&P 500 companies completed reporting their Q2 earnings. Results broadly surprised to the upside relative to subdued expectations, but earnings growth was mixed.

• It was reporting season for Canada’s major banks. Profits were down as a result of rising expenses and money put aside for credit losses, but in absolute terms performance remained resilient.

• In response to a slower than expected post-COVID economic recovery, China introduced a series of stimulus measures targeting its financial markets, property and tech sectors and consumer spending.

• U.S. CPI rose 0.2%. This was in line with expectations and largely due to rent costs. Core inflation, which excludes food and energy, fell 0.1%. At its annual Jackson Hole summit, Fed chair Powell said the Fed would hike rates further if the economy didn’t slow enough to keep inflation declining. *

• Canadian CPI increased from 2.8% to 3.3%. This was driven by mortgage costs and food while gasoline prices didn’t fall as much as expected. However, core inflation figures show a continuing yet slow disinflationary trend. The Bank of Canada’s held rates on their September 6 announcement. *

*Inflation figures are as of July 2023 – these were reported in August

How does this affect my investments?

After several months of strength, equity markets were more hesitant in August. Whether we are already there or not, we are getting close to the end of the rates hiking cycle in North America. Transition periods always come with volatility. Markets will be looking for more visibility on the delayed impact of the hikes that have occurred but also on what it will take for central banks to begin reversing course.

In this months “Market Perspectives”, see attached, we will unpack what transpired throughout the month of August as it relates to financial markets and the economy. In addition, I discuss why I believe investors should be bullish on bonds, the importance of dividends, and finally some simple, yet powerful, behavior finance and investment visuals that I think all investors can benefit from.

Regardless of what’s in store for us as investors next, one thing you can count on is that you have a partner in your corner that is prepared and ready to navigate you. I am here for you every step along the way in your investment journey. As a valued partner, ‘You’ are my reason ‘Why’ I feel the need to continuously thank you for your unwavering trust.

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.

Finally, if you find my monthly market perspectives and insights of value to you, I would really appreciate your feedback so I can continue to improve and curate them for your benefit. In addition, if you have a friend, family member or colleague that you believe could value from my regular insights feel free to pass along.

Thanks for reading. AP

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