Energy and Technologies Give Investors Hope - Your Money Sept 29 2023

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Well the bears certainly won this month. Between a dawning realization the Federal Reserve plans to maintain higher interest rates for longer and a looming government shutdown affecting millions of federal employees, you cannot help but wonder what politicians are thinking. We know what investors are thinking…time to take some profits off the table….or is it? Old school industrials, technology companies, real estate and energy companies are now providing generous dividends to shareholders.

In Canada, we are seeing valuations in the large cap defensive stocks at up to 2-year lows. Sure, Canadian GIC rates north of 5.4% have pulled assets out of equities but with pipeline and telecom stocks yielding over 7%, some of them are very tempting to add to portfolios. And insurance companies are laughing all the way to the bank with these higher rates. Plus, when you factor in weakening economic stats, it could signal an end to Canadian central bank rate hikes. But don’t start thinking interest rates will automatically go down anytime soon. The Bank of Canada and the US Federal Reserve are likely cringing with the massive wage demands by large unions. Any settlements will either be absorbed by corporations leading to lower profits or they will pass on the costs to consumers putting upward pressure on prices. Stagflation anyone?

Meanwhile it’s a new week, month, and quarter for investors to prepare for on Monday and we must laugh at the possible scenario developing in the US. The Federal Reserve’s interest rate policy mantra is “data dependent” but what happens when there is no data or, given the looming US government shut down, how reliable will the data be? We certainly think that if a spending bill is not passed in a timely manner, US Government debt will lose its AAA credit rating from Moody’s. That will likely cause bond yields to edge up and put more downward pressure on stock prices.

Last, but not least, investors will have to contend with the release of third quarter earnings beginning with the mega banks on Friday the 13th. Talk about bad timing.

Happy trading and stay Safe.

Steve Bokor and the Ocean Wealth Team.

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Steve Bokor

Steve Bokor

Portfolio Manager