Stock markets underwent a decline in October, with the Nasdaq losing 2.82%, the Dow Jones down by 1.38%, the S&P showing a 2.26% drop, and the TSX recording a 3.61% decrease for the month. The year-to-date performance figures for the indexes until the end of October are indicated below.

The months of September and October posed challenges for the markets, historically known to be unfavorable. However, positive signs emerged towards the end of October and the beginning of November, fueled by a growing consensus that there won’t be further interest rate hikes. This aligns with the anticipated negative impact on the economy, which central banks had been anticipating and is now manifesting in economic indicators.

As we emphasized since the beginning of 2023, at Investment Strategies, our stance has been that once we surpass the fall season, the worst may likely be behind us concerning interest rate levels and their impact on the markets. Our assessment suggests that interest rates have reached their peak, and the economic slowdown will manifest in the economic indicators over the next twelve months. This trajectory would enable central banks to maintain rates at current levels, with the possibility of considering a reduction in the latter half of 2024, depending on the severity of the economic indicators’ downturn.

Amidst this backdrop, the markets are anticipated to perform relatively well as economic indicators take a negative turn. Given the forward-looking nature of the market, an upward trajectory is expected in anticipation of decreasing rates and improving economic indicators in the future.

The current market environment presents favorable yield-generating opportunities, making it an opportune moment to build positions in portfolios that promise strong yields for the future. We are actively leveraging these opportunities, including investments in longer-term government securities, poised to deliver promising yields and upside potential as interest rates begin to a modest decline.

A Summary of equity index performance YTD to end of October is outlined as follows:

Dow Jones Industrial Average               –  0.29%

S&P 500                                               + 8.85%

Nasdaq                                                +21.65%

S&P/TSX                                              –    2.64%

The current prime interest rate in Canada is 7.20% and 8.50% in the US.