“Reality is merely an illusion, albeit a very persistent one”
- Albert Einstein
As we moved into the fall, there was a lot on investor’s minds.
They were looking to corporations for insight into how the trade tensions between the globe’s two largest economies, the USA and China, would impact earnings. Political uncertainty be it in the form of Brexit, impeachment talk, Syria, the Canadian election, and so many others I could mention.
Investors always get a little bit more nervous as we head into September and October, as historically, those have not been “friendly” months to investors. Last October, which most remember, was down 10-12% on most North American indices.
So here we are, in the last days of October, and it looks like we might actually get through the last 60 days, which were indeed sloppy, but without any major damage. As I write, the S&P 500 closed Friday <1% off all-time highs.
So as of October 8th, 2019 here’s how some selected global asset classes performed:
| Index | 1-year |
| TSX (Canada) | 2.18% |
| S&P 500 | 0.30% |
| Nasdaq | 1.14% |
| Russell 3000 | -0.46% |
| German DAX | 0.19% |
| China SSE | 7.25% |
| Japan Nikkei | -9.23% |
| US - FTSE | -1.25% |
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| Commodities | 1-year |
| WTI - Crude Oil | -31.66% |
| Natural Gas | -19.71% |
| Gold | 23.25% |
| Silver | 19.36% |
| Copper | -8.62% |
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| Other | 1-year |
| CAD/USD | -2.64% |
| Bitcoin | 23.23% |
| 10 Yr Can Bond | 11.37% |
(Source: Factset)
With respect to the concerns:
- The Canadian election came and went without many surprises as the polls, for once as of late, were pretty accurate.
- Brexit seems to be making progress, not as quick as liked, but with days to PM Johnson’s “hard Brexit” date one seems worried.
- In Syria, while I write this, we are heading into the second week of a ceasefire, and days ago it was announced the leader of ISIS, number one on the most wanted list, was located and killed by US forces. Too long to get into here, but I suspect Turkey “threw the USA a bone” with his location.
- Three weeks ago House Speaker Nancy Pelosi announced a formal impeachment inquiry into President Trump. It created a media frenzy for a few days, but has turned into a “Keystone cop” event.
- With respect to earnings, we are right in the middle of this quarter’s reporting cycle, and while there have been a few negative surprises, for the most part they’ve been pretty good.
One of the most reoccurring mistakes investors make is to confuse what happens in the headlines with what concerns the stock market. Markets have a mind of their own, and as I’ve written many times, what it’s principally concerned with is two things: 1) Earnings and 2) Interest rates. In the long run, it’s all earnings.
As I mentioned above, despite a barrage of concerns, the US market is less than 1% from all-time highs. We’ve been in a pretty defined trading range for almost two years and we now sit once again at the top of that range. As we near the end of October I think this Hallowe’en will bring a “treat” and we will see an upside breakout and then move into the historically strong months of November to January.
Of course, I may have just jinxed us :)
As always, please feel free to share with friends and family of whom you believe would enjoy the read.
Stay tuned,
Vito Finucci, B.COMM, CIM, FCSI
Vice President and Director, Portfolio Manager
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