The stock markets declined in September, being historically the worst month of the year as the Nasdaq lost 5.78%, the Dow Jones lost 3.48%, the S&P was down 4.81% and the TSX was down 3.57% for the month. The year-to-date performance figures for the indexes to the end of September are are still positive for the year.
This month’s market commentary is simple: Interest rates, interest rates and interest rates. Interest rates on treasuries have increased over the past few weeks taking the 10-year treasury to around 4.8% and 30-year treasury to around 4.9%. The market is doing the work of the central banks by increasing borrowing costs without the central bank having to raise rates further.
As we have been outlining in our monthly commentary all year, the rise in interest rates is and will provide significant opportunities as yield on bonds and equities increase to levels not seen for years. We are closer to the end of the tightening cycle and will soon see the final push of yields increasing on fixed income securities and equities as prices for interest rate sensitive securities such as banks and utilities continue to increase. The economy is still in relatively good shape as is the job market. We continue to anticipate opportunities to take advantage of exposure to historically high yields.
As we have stated since the beginning of the year, we felt the period September, October and into November could be a time for material market moves and due to surging yields, it is having a negative effect on the stock and bond market. We continue to monitor the markets in anticipation of taking advantage as opportunities present themselves.
A Summary of equity index performance YTD to end of September is outlined as follows:
Dow Jones Industrial Average + 1.11%
S&P 500 +11.37%
Nasdaq +25.18%
S&P/TSX + 1.01%
The current prime interest rate in Canada is 7.20% and 8.50% in the US.
