Quadruple Witching Day Casts a Negative Spell on Stocks - Your Money September 17th 2021

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It was a bit of a risk off trading mentality this week as investors booked profits as a perfect storm of negativity hit the markets. The US debt ceiling has all but closed the window for the US Government to issue bonds for its day to day operations and forget about the Stimulus Bill as politicians grandstand for the $3 plus billion social spending bill. it’s time to clean house and if democratic leaders don’t act soon, I believe they will lose control of both The House and Senate in next year’s mid-term elections. Like Canada, US politicians are drunk on spending money to buy votes but it looks like it might back fire on both sides of the border. To me it looks like politicians are more concerned with their careers and their pensions than with running our government. But I digress.

September is historically not a great month for stocks and when you consider we have not had a meaningful correction for some time, markets are due for a drop. This time round the bears have a cornucopia of topics to choose from. In my opinion the leading triggers are: another Covid variant, a corporate tax hike, and or a continued rebound in inflation. Either that or perhaps the rating agencies downgrade the quality of Government debt in the face of runaway deficits or perhaps central banks decide to kill crypto currencies.

Next Wednesday, the FOMC releases its latest interest rate decision and while I expect the rate to remain unchanged, I also believe you will see a greater number of Fed Presidents push for the reduction in monthly bond purchases by the central bank.  Whether that leads to a taper tantrum like last time, remains to be seen. We know that Jay Powell seems committed to their $120 Billion monthly purchases but his job is also up for renewal so it’s any body’s guess.

As to stock markets, Energy stocks shined again this week as inventories continue to fall squeezing supply even more. To make matters better or perhaps worse, yet another global energy player has decided to allocate a significant portion of its capital expenditures into alternative energy solutions. That is good for the planet… sort of.

As more and more regions switch to alternative energy sources, the risk of adverse events also increases. Aside from Nuclear and hydro, most other clean energies are intermittent (wind does not blow every day and the solar panels don’t work that well at night). So when we get hit with an adverse weather event and the need for electrical energy spikes, countries may learn the hard way between the difference between potential energy production and actual energy production needed on demand.

We could see a future in which our domestic oil production will slide while OPEC + Russia laugh all the way to the bank. Still every time a Chevron or BP decides to cut back their exploration budgets, that is good news for Canadian energy producers. Think about it. If you kill all energy production what are we going to drive on? More importantly, look around your office or your home and then imagine what your life would be like if you removed everything made from petrochemicals. You want a medical test? Either the needle, the reagent and or the vial is made from oil. The keyboard I typed this on is petro chemically based. I could go on but you get the idea. Bottom line, we better be nice to Alberta because I believe they are going to get another chance to ring the bell.

Happy trading and Stay Safe.

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Steve Bokor

Steve Bokor

Portfolio Manager