As mentioned last month, we are increasingly seeing the appearance of global recessionary indicators, such as the monthly report for U.S manufacturing data released on October 1st. This indicator provides data on the strength of U.S manufacturing exports; any number above 50 indicates the economy is expanding, while readings below 50 mean it is contracting. As of October 1, 2019, the reading was 47.2, down from the previous month which was 49.2. This has been the lowest reading since June 2009.
What is set to influence the markets from October to year-end?
Starting mid-month, we enter the Q3 earnings season. Our Portfolio Advisory Group predicts that earnings will meet or come in slightly under expectations. Another market influencing factor specific to Canada is the upcoming federal election on October 21st. The Liberals and Conservatives are currently neck-and-neck in the polls, making the outcome hard to predict.
We are currently adjusting market weight with regards to equities and fixed income assets in our portfolios as we are expecting below normal returns. Over the past year, excluding dividend returns, North American markets have been relatively flat; however, we believe volatility could return for the last quarter of the year.
What are we doing to protect your assets?
Over the next three months, we are offering many informative and educational events for our clients. We are hosting two client events with speakers who specialize in stock portfolios, tax, estate, business succession planning, as well as the real estate market. We are also in the process of updating client asset allocations, which includes any required updates to financial plans. If early indicators are correct, and a recession looms within the next year, we want to make sure that we are ahead of the curve and prepared for every scenario.
Sincerely, Kyle Sarai MBA