To my clients:
This week’s update comes a day early as I take one last long-weekend before the end of summer and return to school for my kids.
To date (and one day early) it has been an up week for North American stock markets with the Canadian TSX up 2.3%; the U.S. Dow Jones Index up 1.1%; and the U.S. S&P 500 up 2.3%.
The main impetus for this week’s move higher is lingering optimism engendered by Fed Chairman Jerome Powell’s Jackson Hole speech last week, combined with labor market statistics that appear to be softening (perversely, a good thing in the current scenario as it suggests that inflation pressures are easing) and corporate earnings results that continue to come in broadly better than expected.
With respect to Mr. Powell’s speech, there are a variety of opinions as to whether he (and the Fed) were leaning “hawkish” (inclined to raise rates still further) or “dovish” (no longer inclined to raise rates). While Mr. Powell certainly left the door open for further rate hikes, my own interpretation of his language leaned toward the dovish camp.
On the softening labor front, JOLTS job openings (a data release I rarely comment on) showed that job openings have declined to a two-year low. Fewer job openings is indicative of lessening labor demand. Of course tomorrow we have the actual U.S. Employment Report which will either support or contradict this narrative. Also scheduled for release is the ISM Manufacturing Index. From afar, I’ll be watching these releases with GREAT interest.
Lastly, I sold Cisco - a long-time position held in discretionary client portfolios. This position has been a pedestrian performer in client accounts, and I took the opportunity with the recent rise to secure meagre profits for clients and look for a better performer elsewhere. With recent weakness in shares of Nike, I’m looking at that company as a possible option. Alternatively, and perhaps more likely, I’m also considering using the Cisco proceeds to increase fixed-income holdings for clients given that interest rates are very likely at, or very, very near a peak. I’ll consider over the weekend and will likely act early next week.
That’s it for this week. All the best,
Nick
Nick Scholte, CIM, FCSI
Senior Portfolio Manager
Scholte Wealth Management
RBC Dominion Securities Inc. │ Tel: 604.257.7569 │ Fax: 604.235.9950
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