Bears Bite Back! Your Money September 8th, 2023

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Investors continue to fret over rising economic stats fearful it will lead to more rate hikes. Having said that, the BOC stood pat with promises of more rate hikes should inflation rise up again. We cannot help but think there is at least one more before year end and forget about cuts in the first quarter of 2024. Canadians were caught off-guard by the surprise 39900 new jobs in August with most of those positions in full time jobs. It certainly offset the negative Q2 GDP reported earlier this week, but underneath the numbers investors need to realize the population growth exceeded the new jobs stat. Obviously, this will put more pressure on housing costs, access to healthcare plus the usual pressure on food and energy prices. Speaking of prices, OPEC + Russia announced an extension to supply cuts to year end. No surprise crude oil prices spiked on the news and reaffirmed Saudi Arabia’s commitment to get oil back to $100 per barrel.
As you know we have been closet bulls on oil since last year and it looks like the dislocation of pricing in crude coming from President Biden’s release of strategic reserves, has not only worked its way through the supply chain, but creates a wave of future demand that might hit taxpayers in the pocketbook. We feel the US Government will be forced to replace sold reserves at higher prices not lower ones and could lead to future price inflation. Meanwhile oil stocks continue to rise.
We are one week away from the next OPEC and IEA monthly report, but we were very interested to note that despite signs of an economic slowdown in China, crude oil imports for petrochemical usage remains firm. And of course, US/Sino relations show no real signs of improving despite the geopolitical rhetoric coming from the US administration. Take apple for example. There are published reports that China is banning Apple phones for government workers plus Huawei just unveiled its latest phone that should provide users with 5G equivalent bandwidth. Apple stock fell almost 6% this week but it is still up 37% this year.
Turning to next week, markets could continue to slide if inflation stats break to the upside and given the anecdotal cost of gasoline, food and airfare. It will certainly play a key role in the Fed’s decision on interest rates the week after. Right now, the street favors a hold, but we continue to believe cost push inflation is just beginning to set in. The markets will likely take a keen interest in the wage settlements sought by the UAW, who are seeking a 40% wage hike. We think that is a pie in the sky number, but a prolonged strike will reduce the supply of autos and that usually leads to higher prices.
Finally it is RibFest this weekend, so if you see me with sauce from ear to ear and a pile of bones on the table, take pity on me Monday morning as I recover from a BBQ meat hangover.

Happy trading and stay Safe.

Steve Bokor and the Ocean Wealth Team.

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Steve Bokor

Steve Bokor

Portfolio Manager