Gravitas: Seasonal Lows

September 22, 2023 | Michael Newton


The Newton Group Insights

Tough week. The stock market is messy, not trending higher, and frustrating many investors. This type of market environment, at this time of the year, is completely normal. We are currently in the middle of what ranks as the weakest part of the year for equities from a short-term seasonal perspective, but simultaneously, it is also about to begin one of the strongest in terms of three-month performance. The last three times the S&P 500 was down at least 1% in both Aug and Sept? October was up 8.0% in 2022, 8.3% in 2015, and 10.8% in 2011. In fact, since the 1950s it has been higher 9 of the past 10 times. As bad as things feel, I wouldn't get too worried. These are just seasonal lows.

This week, The FOMC decided to keep interest rates steady yesterday, sounding more optimistic about the American economy than at any point over the last year. Critically, the new projections from meeting participants essentially erased the recessionary fall in growth and rise in unemployment they previously implied was necessary to contain inflation. “We are in a position to proceed carefully” was thus the theme of the meeting—Jerome Powell used variations of that phrase 6 times during his press conference, explaining that with inflation cooling and growth holding up, he felt as though the Fed had been afforded the luxury of patience.

Should you have any questions or concerns, please feel free to reach out.

Portfolio Notes

(+) indicates a positive development, (-) indicates negative, and (~) indicates neutral

(+) Disney (DIS-US) is building more theme parks. The entertainment giant is spending US$60 billion on new entertainment parks, both at home and abroad, and the expansion of its cruise line business. Disney will roll out more cruise ships, establish a new home port in Singapore and tap more than 1,000 acres of its reserve land as it pursues the strategy. “Frozen” and “Zootopia”-themed attractions, inspired by the company’s hit animation movies, are among the ideas being explored in places like Hong Kong, Paris, Tokyo and Shanghai. Disney hopes to offset losses in its struggling streaming division and other areas. Owned in US Portfolio.

(-) Hecla Mining (HL-US) On August 21, the company announced that a fire in the mine's #2 shaft, a secondary egress, had caused a ground fall and no employees were in the mine at the time. This week, Hecla provided an update on operations at the mine. Production will be suspended for the remainder of 2023 to develop a new secondary egress to bypass a damaged portion of the #2 shaft. 2024 guidance is not expected to be impacted. The company believes its insurance coverage will cover most of the property damage and cost of business interruption (less a deductible). Owned in Opportunity Portfolio.

(+) Super Micro Computer (SMCI-US) The information technology stock rose after Barclays initiated coverage of Super Micro Computer on Tuesday with an overweight rating. The firm’s $327 price target represents nearly 34% upside from Monday’s close. "Against the backdrop of AI investment trends, we believe SMCI is well positioned to capture the rising AI server opportunity with more share gains ahead driven by its superior design capability and strong AI partnerships," analyst George Wang wrote in an investor note. "We estimate SMCI has 7% market share globally, implying ample share gain potential ahead," Wang added. Owned in Opportunity Portfolio

Weekend Reading

Molecular Tourism What do increasing US oil exports, oil from the Strategic Petroleum Reserve ending up in China, and efforts to reopen the oil trade with Venezuela have in common? DOOMBERG

6 thoughts on "Elon Musk" by Walter Isaacson Including the Twitter deal, SpaceX's "Idiot Index", the manufacturing "algorithm", management style and Big Tech beefs (Bill Gates, Larry Page, Jeff Bezos). TRUNG

Charting the course for Canadian banks Stu Kedwell, Co-Head of North American Equities, provides an overview of Canadian bank results, and explains why loan loss provisions are a big theme this earnings season. Stu also discusses how these bank earnings will impact the performance of dividend portfolios. RBC GLOBAL ASSET MANAGEMENT

The election model is a little too popular Nate Silver getting meta about his plans for 2024 NATE SILVER

“They Went To Sea In A Sieve, They Did” In 1969, Donald Crowhurst fooled the world into believing he was completing the fastest non-stop solo circumnavigation of the globe. Then his boat was found, empty and adrift in the Atlantic. SPORTSNET


“There are no atheists in a foxhole, and there are no pure fundamentalists in a market correction."

- Josh Brown