Stock Market Correction From Overly Optimistic Levels Continues - Commitment to Full Neutral Equity Weighting Looms

Sep 11, 2020 | Nick Scholte


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But any overweight commitments must await clarity on covid transmission rates in light of back to school and cooler autumn temperatures. Such clarity is unlikely before October, or possibly November.

To my clients:

It was a mostly down week for North American stock markets with the Canadian TSX finishing flat at 0.0%; the U.S. Dow Jones Index finishing down 1.7%; and the U.S. S&P 500 finishing down 2.5%.

Quite frankly, I struggled for content this week. To my lens, I view the weakness in markets the past two weeks as giveback of excessive optimism, and not necessarily based on any fundamental rationale… yet. In the short term, if the weakness continues I’ll likely bring portfolio equity up to a full neutral, or slightly beyond neutral, weighting as early as next week. I will not, however, go to an outright overweight position any time soon. I’d like more clarity as to how the return to school and cooler autumn temperature impact covid case curves before making such a commitment. These are not likely to become apparent until well into October, if not November.

I contemplated some discussion of vaccine developments, but let’s just say that at least one vaccine looks probable by the end of 2020. However, availability, distribution, and the question of willing acceptance by populations to be vaccinated led Dr. Anthony Fauci to today suggest that a “full return” to pre-pandemic “normal” is not likely until the end of 2021 – despite vaccine approvals likely coming in the next three months.

That’s it for this week. All the best and stay safe,

Nick

Nick Scholte, CIM, FCSI

Vice-President & Portfolio Manager

Scholte Wealth Management
RBC Dominion Securities Inc. │ Tel: 604.257.7569 │ Fax: 604.235.9950
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