US Judge Takes a Bite Out of Apple - Your Money September 10th 2021

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Well  it looks like September is living up to its reputation as a down month on average. Mind you August is also typically a down month too but investors seem to have forgotten the rule in their rush to grab the latest momentum based stock as “fear of missing out” dominated their trading behaviour.  However, with earnings season all but over, economic stats start to play a more important role. Fed Presidents will meet on the 21st of this month and even though Jay Powell reiterated his “lower for longer” mantra, one cannot start to wonder whether he will change his tune as key inflation measures break to the upside. You may recall last week, Average Hourly Earnings rose by 0.6% in August. Couple that with the 0.7% August increase in Producer Prices makes me think inflation may not be transitory as per the Jay Powell mantra. In my opinion, the Covid shut down may have created a systemic shock to the system that when combined with the avalanche of near zero rate credit will create an inflationary spiral similar to what took place in the 1970’s.

Of course big business is busy trying to hide the inflation kick by keeping prices stable but reducing the size of the product being purchased. Go buy a box of cookies and see how much they have shrunk the package. Sadly when you couple the supply bottlenecks with the level of damage to our food chain, and we might be in for a significant food sticker price come winter. Personally I think it is why our fearless leader chose to have a snap election. Better to do it now when things still look rosy, rather than wait for the food bill in 2022. Actually, investors will get a better measure on Tuesday when the US releases its monthly Consumer Price Index. Right now the pundits are predicting a 0.5% increase for August the same as July’s. Any surprise to the upside could cause bond investors to hit the sell key, which may be tempered by a forecasted drop in retail sales on Thursday. Canada’s monthly inflation stat is out on Wednesday.

Ok enough doom and gloom. Defensive stocks still look like a good bet. Pipelines, telecomm, consumer staples and utilities still offer good dividends and if oil prices remain at these levels, expect extra dividends and stock buy backs later this year and into 2022. Good old maple Leaf Foods is paying a 2.6% dividend and they raise it just about every year.

Happy Trading and Stay Safe out there.

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Steve Bokor

Steve Bokor

Portfolio Manager