- Equity markets enjoyed a winning week to turn the page to a new month. Supporting the broad-based gains were data pointing to a softer labour force and therefore, more reason for the Fed to stand pat.
- The S&P/TSX led the weekly gains, supported by an 11% pop in tech stocks, bringing that sector’s year-to-date bounce up over 50%.
- A more modest 4% rise in tech and energy also powered the S&P 500 to a 2.5% rise on the week, while consumer staples and utilities lost some ground in that index.
Bottom Line: The Jackson Hole meeting underscored that even if the Fed does pause at their next meeting, it doesn’t necessarily mean they’re done raising interest rates.
Bottom Line: It may not happen immediately, but in the longer term, we expect the big banks in Canada and the U.S. to outperform the broader market.
Bottom Line: With oil prices buoyed by high demand, limited supply, and the overall economic environment, potential opportunities in Energy are worth examining.
There’s no doubt that this market has been extremely resilient. Even though we saw a bit of a pullback in August, as we were expecting, we’re already seeing some of those declines reversing, and earnings have been good-to-great despite continuing negativity in Financials and Retail. In our view, this is not yet a situation where investors should be too cautious. There are ways to build some protection into a portfolio without getting overly conservative—for instance, rotating from Discretionary to Staples, adding duration as we approach the likely end of the rate-hiking cycle, or holding some gold. We expect that September will be a bit choppier for markets, which is certainly worth keeping in mind. But you don’t want to miss opportunities that might come along, like in August when the Nasdaq declined. A little bit of caution goes a long way, and that’s how we’re positioning ourselves at present.
For a detailed breakdown of our portfolio positioning, check out the latest BMO GAM House View Report, titled Prices Cool in a Scorching Summer: What Happens Next?
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