Morning,

I hope all you Canadian readers had a memorable thanksgiving weekend!

Unfortunately, the news on the weekend around the Israel conflict was grim. The conflict between Israel and militant group Hamas has entered a fourth day, with at least 1,500 deaths thus far. We continue to digest the impact of these global events on the market, but with all the conflict around the world at the moment, what better time to pause and be grateful than Thanksgiving.

It’s one of my favorite weekends of the year, we take the little Henderson family up north to enjoy one last weekend up at the beach and a “no pressure pot lock” with friends, and then home to a lovely thanksgiving dinner with family last night – thanks Mom!

Each holiday season comes with high expectations for a cozy and festive time of year and research suggests that one aspect of the Thanksgiving season can actually lift the spirits, and it's built right into the holiday — being grateful.

“Let us be grateful to people who make us happy; they are the charming gardeners who make our souls blossom.” - Marcel Proust

The word gratitude is derived from the Latin word gratia, which means grace, graciousness, or gratefulness (depending on the context). In some ways, gratitude encompasses all these meanings. Gratitude is a thankful appreciation for what an individual receives, whether tangible or intangible. With gratitude, people acknowledge the goodness in their lives. In the process, people usually recognize that the source of that goodness lies at least partially outside themselves. As a result, being grateful also helps people connect to something larger than themselves as individuals — whether to other people, or nature.

Melody Beattie once said that “gratitude unlocks the fullness of life. It turns what we have into enough, and more. It turns denial into acceptance, chaos to order, confusion to clarity. It can turn a meal into a feast, a house into a home, a stranger into a friend. It turns problems into gifts, failures into successes, the unexpected into perfect timing, and mistakes into important events. It can turn an existence into a real life, and disconnected situations into important and beneficial lessons. Gratitude makes sense of our past, brings peace for today, and creates a vision for tomorrow.”

Gathering around the table to give thanks is something that can add years to your life, research shows.

“The grateful mind reaps massive advantages in life,” Dr. Robert Emmons, a professor of psychology at the University of California, Davis and the founder a research lab that studies the effects of grateful living. “Health and wholeness, wellness and fullness result from the systematic practice of a grateful living.”

One research study that Emmons lead in 2003 also found that participants who took time weekly to reflect on things for which they were grateful reported fewer symptoms of physical illness and spent more time exercising.

A study published in the Journal of Consulting and Clinical Psychology in 2015 found that people who took part in a diary exercise twice a week asking them to document people and things that helped them at work "reduced their stress and depressive symptoms significantly."

Sara Algoe, an associate professor of social psychology at the University of North Carolina, studies the role gratitude plays in interpersonal relationships.

Her research has found that gratitude is good for relationships and has "follow-on effects" for physical health.

"Taking the moment to acknowledge the things that people do for us that we really value actually has downstream consequences for both people," she said. "When couples express gratitude more frequently and descriptively to each other, they are happier in their relationship."

“Let us remember that, as much has been given us, much will be expected from us, and that true homage comes from the heart as well as from the lips, and shows itself in deeds.” - Theodore Roosevelt

In positive psychology research, gratitude is strongly and consistently associated with greater happiness. Gratitude helps people feel more positive emotions, relish good experiences, improve their health, deal with adversity, and build strong relationships.

People feel and express gratitude in multiple ways. They can apply it to the past (retrieving positive memories and being thankful for elements of childhood or past blessings), the present (not taking good fortune for granted as it comes), and the future (maintaining a hopeful and optimistic attitude). Regardless of the inherent or current level of someone's gratitude, it's a quality that individuals can successfully cultivate further.

And now, to the markets

Some welcomed news this morning, we are starting to see bond yields (interest rates) drop by the most since March on a combination of dovish comments from Federal Reserve officials and on safe-haven demand amid the Israel conflict. The moves were made more pronounced by cash Treasuries on both sides of the boarder being closed on Monday. The month of September proved to be challenging for global investors, with increased volatility and declines in prices across most sectors. Notably, the technology sector, a standout performer for most of the year, wasn’t immune as it too fell victim to declines. On the other hand, the U.S. dollar strengthened against most major currencies, as it often does during periods of broad market weakness. The Canadian dollar was the exception as it largely kept pace with the greenback, due predominantly to rising oil prices. Meanwhile, bond yields have risen (while bond prices have fallen) meaningfully as of late. Below, we address what has driven this new bout of angst.

One catalyst for the rise in volatility has been a growing appreciation that interest rates may stay higher for longer than originally expected. Central banks in Canada, the U.S, and England kept their policy rates unchanged at their most recent meetings. Still, their language clearly emphasized a message they have been trying to deliver for some time: the need to tread cautiously with future policy decisions and to avoid cutting rates too early. Most central banks have acknowledged that inflation has come down but are awaiting more definitive proof that inflation is under control. Moreover, an uptick in North American inflation, an increase in U.S. job openings, and some improvement in the U.S. manufacturing sector, all suggest underlying resilience in the economy, which bolsters the case for sustained higher rates.

The swift move higher in government bond yields (and the corresponding price decline) has been particularly noteworthy. For example, the 10-year U.S. government bond yield rose from nearly 4.25% at the start of September to close to 4.75% recently, marking a 16-year high. The move in Canada has been similar, with the 10-year yield rising from roughly 3.55% to 4.15% over the past month. This shift isn’t attributable to a single factor. A combination of economic resilience, anticipation of an extended period of higher rates, lingering inflation concerns, and lower demand from traditionally big investors like foreign governments, central banks, and commercial banks may have contributed. Moreover, there has been a growing supply of bonds as governments increase their issuance to fund their budget deficits. In other words, lower demand and rising supply have both played a role.

The rise in government bond yields is having a broader impact on markets than one might assume. Most people appreciate that higher rates raise interest costs for borrowers. However, these rates also influence the prices investors are willing to pay for various investments. That’s because government bonds, widely regarded as being nearly “risk-free”, often set the minimum return investors demand from other asset classes. If held to maturity, investors can count on the government returning their full principal, in addition to making promised interest payments along the way. If you’re an investor and you see that these bonds are now yielding 4% versus 1% a few years ago, it may change how you evaluate the prospect of investing in riskier assets like stocks or real estate. This reassessment can result in a valuation adjustment, with prices that fall as bond yields rise, and vice versa. Some investments naturally have more sensitivity to this phenomenon than others.

While the recent uptick in volatility and market declines have been orderly so far, we are mindful that bond yields may continue to move higher in the near-term. However, we believe that current yields, which are near decade highs, present some of the more attractive opportunities in fixed income in some time. As a result, we continue to explore the asset class in client portfolios where we believe it’s appropriate. We also believe that sustained high interest rates will eventually take their toll on the economy, which, in turn, should help re-establish the diversification benefits of fixed income in portfolios as bond yields begin to settle down.banks themselves. We continue to manage portfolios with this expectation in mind.

“As we express our gratitude, we must never forget that the highest appreciation is not to utter words, but to live by them.” - John F. Kennedy

Thanksgiving and Gratitude

Thanksgiving is a perfect opportunity to show gratitude….“The word ‘thanksgiving’ literally means, giving of thanks. Thanksgiving is an action word,” Emmons said. “Gratitude requires action.”

In order to avoid this "wasted opportunity" and reap the health benefits of gratitude, Emmons shared these tips for making gratitude part of your every day life.

• Make a list of what you typically take for granted. Then think about these “as granted” rather than “for granted.”
• Consider what your life would be like without this person/event/circumstance. In other words, if this had never happened or came along. Subtract something good from your life. This is known as addition via subtraction.
• Give something away. When we are givers, we reflect more clearly on what it is like to be a receiver. Also, we are grateful for the opportunity to give, knowing that giving brings happiness to self and others.
• Identify non-grateful thoughts: For example, thinking you deserve better circumstances, that other people are better off; that life is boring, that I am entitled to this, that, or the other; That life is monotonous, tedious; That things have not turned out the way you wanted. Practice using the language of thankfulness: Gifts, givers, receivers, favor, fortune, fortunate, blessed, lucky.
• Find someone behind the scenes at your workplace or neighborhood and thank them. Speak words of gratitude to them. Takes two minutes. You will both benefit

“The roots of all goodness lie in the soil of appreciation for goodness.” - Dalai Lam

Be well & enjoy the moments,

Derek