Market Update October 2024
In the last three months, we’ve witnessed important shifts in the global economy and markets. In response, we’ve made strategic adjustments to your portfolio, balancing opportunities for growth with careful risk management.
Here’s a summary of key events and their influence on our recent decisions:
Key Economic Events:
Bank of Canada Rate Cuts: On September 4th, the Bank of Canada lowered its key interest rate to 4.25%. Another rate cut is anticipated on October 23rd, with markets seeing a 50% chance of a further 50 basis point (bps) reduction.
S&P 500 Performance: U.S. markets remained steady, with the S&P 500 gaining 2.1% in September. The Canadian S&P/TSX index outperformed slightly, posting a 3.2% increase.
U.S. Federal Reserve Actions: On September 18th, the Federal Reserve surprised markets by cutting rates by 50 bps, shifting its focus from battling inflation to stabilizing the job market.
Oil Price Movement: Oil prices fell by 8% falling below their starting point for the year. Saudi Arabia’s decision to boost oil supply could ease inflation pressures for consumers.
Gold’s Strong Performance: Gold rose by 5.1% in August and has continued to perform well throughout the year, as global tensions (e.g., Israel-Iran, Russia-Ukraine) drive investors toward safer assets.
Cooling Inflation: Inflation in Canada has eased to 2%, with U.S. inflation also down to 2.5%, offering some relief for both economies.
Labour Market Trends: Hiring has slowed to its lowest level since 2014, and fewer workers are changing jobs, resulting in the lowest quit rate since 2015 (excluding pandemic data).
China’s Stimulus Measures: China’s central bank implemented stimulus measures, including rate cuts and lowered bank reserve requirements, to counter deflation and stimulate economic growth.
Adjustments to Your Portfolio Over the Last Three Months
In response to evolving market conditions, we’ve made several adjustments to your portfolio over the past three months. These changes have supported its growth while continuing to manage risk effectively:
Increased Gold Allocation: We raised our gold holdings (CGL) by 1%, bringing the total allocation to 5%. Given the backdrop of rate cuts and rising geopolitical risks, gold serves as a strong hedge against uncertainty, delivering solid returns and outperforming equities year-to-date.
Boosted U.S. Equities Exposure: With the strength of the U.S. economy and anticipated rate cuts, we increased our exposure to the S&P 500 index (ZSP) by 1%. This adjustment allowed us to capture gains from the U.S. stock market’s robust performance, positioning the portfolio for further growth as the U.S. elections approach.
Adjusted Fixed-Income Holdings: We maintained a focus on short-term bonds and cash, as these assets have consistently outperformed their long-term counterparts. This strategy has helped us manage interest rate risk effectively, while providing a cushion against market volatility.
Diversification into Non-Equity Assets: To balance the portfolio against equity market fluctuations, we diversified into uncorrelated strategies and alternative asset classes. This included increasing holdings in money market funds and other lower-risk investments that have shown resilience amid market uncertainty.
These adjustments have contributed to steady growth while mitigating risks associated with geopolitical tensions, economic shifts, and market volatility. By maintaining a proactive approach, we continue to balance risk management with the pursuit of growth opportunities.
Looking Forward
As we move forward, we’re closely monitoring the potential for further rate cuts and will continue adjusting bond duration and asset allocation to optimize returns.
We will continue to monitor market developments and update you on any adjustments we make to ensure your portfolio stays well-positioned to meet your objectives and goals.
If you have any questions or need anything, please know that we are always here for you.
P.S. We’re proud to share that SilverBirch portfolios are amongst the top-performing portfolios managed by our peers.
National Bank Financial - Wealth Management (NBFWM) is a division of National Bank Financial Inc. (NBF), as well as a trademark owned by National Bank of Canada (NBC) that is used under license by NBF. NBF is a member of the Canadian Investment Regulatory Organization (CIRO) and the Canadian Investor Protection Fund (CIPF), and is a wholly-owned subsidiary of NBC, a public company listed on the Toronto Stock Exchange (TSX: NA).
I have prepared this report to the best of my judgment and professional experience to give you my thoughts on various financial aspects and considerations. The opinions expressed represent solely my informed opinions and may not reflect the views of NBF.