Market Update October 2024
History suggests that the S&P 500 (SPX) has historically grown +16% in the first twelve months following the first interest rate cut in a new cycle. It had been four years since the Federal Reserve (FED) cut interest rates in the U.S. prior to the recent 0.50% point cut.
So far this year, the Bank of Canada (BOC) has reduced interest rates 0.75% starting in June while the FED has reduced 0.50% starting last month. Strategists suggest that we can expect further interest rate cuts in the U.S. and in Canada.
The recent change in direction might best be explained by economic data providing hints of an economy that was slowing, which was the reason for hiking interest rates in the first place to combat inflation. The trick for central bankers is to start easing interest rates prior to the economy slipping into recession which seemed more likely in Canada than the U.S.
Remember that interest rate cuts have a lagging impact, typically not felt fully in the economy for 12-16 months.
September/October are historically the worst two months for the stock market, but that certainly hasn’t been the case so far this year despite volatility which came as early as August after July market highs.
Inverted yield curves are historically a sign of a pending credit crunch/recession but both two and ten-year yield curves are no longer inverted, though they had been since 2022.
The U.S. election is coming up early next month but I doubt it will have much impact on markets unless their was a sweep, resulting in significant policy change. Otherwise, I believe a divided America will result in more or less continued policy gridlock until potentially mid-terms.
Here we are at market highs despite politics, geo-political risk from Russia and the Middle East and it reminds me of a saying… “The stock market is built on bad news” Put another way, the market continues despite apparent bad news and despite a history of short-term instances where it…reacted.
Market Indices YTD at September 30th…
TSX (Canada broad market) 14.51%
SPX (U.S. broad market) 20.81%
Nasdaq (U.S. tech weighted market) 21.11%
Here is a look at the broad-based S&P 500 market both short and longer term…
It is nice to see the broader market participating where earlier in the year, it was driven primarily by technology. The U.S. remains the most resilient market lead by technology, financials, industrials and energy.
Here is an update of my team’s contact information:
Trading:
Rob Hunter 250 953 8416
Senior Wealth Advisor
Campbell Hunter 250 953 8422
Wealth Advisor 604 623 3282
Administration:
Khanh Vu 250 953 8415
Wealth Associate
Comet Tang 250 220 9021
Wealth Associate
Stephanie Hunter 250 953 8442
Associate
If you have any questions, we are a phone call away.
Best,
National Bank Financial
Rob Hunter
Senior Wealth Advisor
Sources: Stockcharts.com, National Bank Economics
National Bank Financial – Wealth Management (NBFWM) is a division of National Bank Financial Inc. (NBF), as well as a trademark owned by National Bank of Canada (NBC) that is used under license by NBF. NBF is a member of the Canadian Investment Regulatory Organization (CIRO) and the Canadian Investor Protection Fund (CIPF), and is a wholly owned subsidiary of NBC, a public company listed on the Toronto Stock Exchange (TSX: NA).
The opinions expressed herein do not necessarily reflect those of National Bank Financial. The particulars contained herein were obtained from sources we believe to be reliable but are not guaranteed by us and may be incomplete. The opinions expressed consider a number of factors including our analysis and interpretation of these particulars, such as historical data, and are not to be construed as a solicitation or offer to buy or sell the securities mentioned herein. Unit values and returns will fluctuate, and past performance is not necessarily indicative of future performance. Important information regarding a fund may be found in the prospectus. The investor should read it before investing.
The particulars contained herein were obtained from sources we believe to be reliable but are not guaranteed by us and may be incomplete. The opinions expressed are based upon our analysis and interpretation of these particulars and are not to be construed as a solicitation or offer to buy or sell the securities mentioned herein. The opinions expressed do not necessarily reflect those of NBF.
The securities or sectors mentioned herein are not suitable for all types of investors. Please consult your Wealth Advisor to verify whether the securities or sectors suit your investor’s profile as well as to obtain complete information, including the main risk factors, regarding those securities or sectors.
I have prepared this report to the best of my judgment and professional experience to give you my thoughts on various financial aspects and considerations. The opinions expressed represent solely my informed opinions and may not reflect the views of NBF.
Selling calls against stock (Covered Writing): Shares may need to be sold at the strike price of the option at any time prior to expiration. If the calls are assigned, further opportunity for appreciation in the underlying security above the strike price is foregone.
Risk/Reward of the strategy = Strike price minus the purchase price of the underlying plus the premium received from the sale of the call. The maximum loss is the same as holding a long position less the premium received.
The investment advice given only applies to residents of the provinces of British Columbia, Alberta, Manitoba, Saskatchewan, Ontario, New Brunswick and Quebec.
National Bank Financial is a member of the Canadian Investor Protection Fund.
