An Unusual Week: Jackson Hole and Q3 Bank Earnings

September 5 to 8, 2023


An Unusual Week: Jackson Hole and Q3 Bank Earnings

September 5 to 8, 2023


Market Recap

  • 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.

Jackson Hole

Unlike previous Jackson Hole meetings, the latest symposium was noteworthy in that there wasn’t much information divulged that is likely to move markets. What was made clear, however, is that inflation has come down to a level that’s more acceptable, but not to a level where the U.S. Federal Reserve (the Fed) can officially call it quits—they’re still willing to push interest rates higher if that’s what the data suggests. This gives markets slightly more clarity on the fact that in the Fed’s mind, the job is not fully done. Not only could we see more rate hikes, but its also likely that rates will need to stay higher for longer to allow the economy to start to moderate, and for previous increases to filter through. Now the question is how long markets will believe this. History shows that the market quickly forgets what the central banks say and move to their own thesis. But it is a reminder that investors shouldn’t expect rate cuts any time soon. In our view, the Fed doesn’t want an actual recession; rather, what they’re aiming for is a smooth landing, with the economy and job market weakening just enough to prevent inflation from flaring back up.

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.


Canada’s Big Six banks have released their Q3 earnings reports, and what’s clear is that we’re seeing higher loan loss provisions across the board. This tells us that the consumer is weakening—higher interest rates are having an impact, and banks are preparing for more bankruptcies and delinquencies going forward. Overall, results were mixed, and the story is one of slower economic growth. That said, the long-term fundamentals for the big Canadian banks remain strong, with healthy balance sheets, good long-term vision, and attractive dividends. There’s still a cloud hanging over Financials, and investors should be aware of the nuances between the different banks, but our belief is that the biggest damage is mostly behind us. This is true for U.S. banks as well. Firms like Citigroup, Bank of America, and JPMorgan Chase are all trading low relative to the S&P 500, which hasn’t happened in some time. In the past 50 years, it has been very rare to see an extended stock market rally that excluded banking, so we expect a catch-up trade of some kind due to this valuation disconnect, but you do need to be patient. In general, we think it’s wise to view banking as a long-term trade and not try to be too tactical.

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.


The big story in Energy is that demand for oil remains high while supply is still limited—that differential is what’s causing crude prices to stay elevated. The fact that recession risks keep getting pushed out and that inflation continues to linger over the 2% threshold have also been tailwinds. We believe that the current range of $80-$90 per barrel represents fair value, and that there’s room for Energy stocks to go higher. The question we’re asking ourselves is how we want to play it. Is it through broader exposure to the sector? Or with covered call strategies? Or do we add a layer of selling put spreads so that we can buy into Energy if there’s a pullback but get paid if it stays rangebound? We made a great call on Energy about a year and a half ago, opening and closing a position at opportune times. Now, we’re revisiting potential opportunities in the sector, and most likely, our exposure won’t be through a pure long position—if you can get paid a 3-5% premium selling a monthly option, that’s a good win even if the stock doesn’t do much.

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?


As Chief Investment Officer, Sadiq S. Adatia’s views directly influence the BMO ETF Portfolios.


The viewpoints expressed by the Portfolio Manager represents their assessment of the markets at the time of publication. Those views are subject to change without notice at any time without any kind of notice. The information provided herein does not constitute a solicitation of an offer to buy, or an offer to sell securities nor should the information be relied upon as investment advice. Past performance is no guarantee of future results. This communication is intended for informational purposes only.

BMO Global Asset Management is a brand name under which BMO Asset Management Inc. and BMO Investments Inc. operate.

Any statement that necessarily depends on future events may be a forward-looking statement. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. Although such statements are based on assumptions that are believed to be reasonable, there can be no assurance that actual results will not differ materially from expectations. Investors are cautioned not to rely unduly on any forward-looking statements. In connection with any forward-looking statements, investors should carefully consider the areas of risk described in the most recent simplified prospectus.

This article is for information purposes. The information contained herein is not, and should not be construed as, investment, tax or legal advice to any party. Investments should be evaluated relative to the individual’s investment objectives and professional advice should be obtained with respect to any circumstance.

Commissions, management fees and expenses (if applicable) all may be associated with investments in mutual funds. Trailing commissions may be associated with investments in certain series of securities of mutual funds. Please read the fund facts, ETF facts or prospectus of the relevant mutual fund before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Distributions are not guaranteed and are subject to change and/or elimination.

For a summary of the risks of an investment in the BMO Mutual Funds, please see the specific risks set out in the prospectus. ETF Series of the BMO Mutual Funds trade like stocks, fluctuate in market value and may trade at a discount to their net asset value, which may increase the risk of loss. Distributions are not guaranteed and are subject to change and/or elimination.

BMO Mutual Funds are managed by BMO Investments Inc., which is an investment fund manager and a separate legal entity from Bank of Montreal.

®/™Registered trademarks/trademark of Bank of Montreal, used under licence.


Steven Shepherd profile photo
July 11, 2024

BMO ETF Portfolios’ July commentary: “Take the Money and Run, or Take it Easy?”

With the end of the month, quarter and first half of 2024 in the books, markets seem to be taking a collective deep breath in anticipation of what the remainder of the year will bring.
Sadiq Adatia
Sadiq Adatia
July 8, 2024

What can politics do to your portfolio?

What did we learn from the Fed’s reaction to the latest inflation data? How will election-related volatility manifest, and how big of an impact could it have on markets?
Sadiq Adatia
Sadiq Adatia
July 2, 2024

Why American consumers are holding on—and Canadians aren’t

What is the state of the consumer as we enter the second half of the year? What impact did last week’s U.S. presidential debate have on markets?
June 24, 2024

Chairman Powell: The Ultimate Bond Villain?

What’s causing the gap between Canadian and U.S. equities? What is the source of recent bond volatility, and will it persist for the rest of 2024?
Banner image of vehicle shifter with stock market graphic overlay
House view
June 21, 2024

Shifting to Neutral: The Case for Optimistic Caution

In early June, the Bank of Canada (BoC) became the first of the world’s major central banks to lower interest rates, cutting by 25 basis points. a day before the European Central Bank (ECB) made the same move. But in the United States, it is a different story.
Steven Shepherd profile photo
June 19, 2024

BMO ETF Portfolios’ June commentary: “Downshift to Neutral”

While our longer-term outlook for equities remains positive, there are a number of short-term tailwinds that are materializing, in our view.

Website attestation

you are entering the BMO Global Asset Management (GAM) Institutional website.

Read our Terms and Conditions
Click here to contact us

This information is for Investment Advisors only. By accepting, you certify that you are an Investment Advisor. If you are NOT an Investment Advisor, please decline and view the content in the Investor or Institutional areas of the site. The website is for informational purposes only and is not intended to provide a complete description of BMO Global Asset Management’s products or services. Past performance is not indicative of future results. It should not be construed as investment advice or relied upon in making an investment decision. The opinions expressed are subject to change without notice. Products and services of BMO Global Asset Management are only offered in jurisdictions where they may be lawfully offered for sale. The information contained in this website does not constitute an offer or solicitation by anyone to buy or sell any investment fund or other product, service or information to anyone in any jurisdiction in which an offer or solicitation is not authorized or cannot be legally made or to any person to whom it is unlawful to make an offer of solicitation. All products and services are subject to the terms of each and every applicable agreement. It is important to note that not all products, services and information are available in all jurisdictions outside Canada.