After taking a breather in the middle of July, North American stock markets continued their climb through the summer before ultimately dropping off in the Month of September for a negative finish to the quarter.

Historically speaking, September has been the worst month for markets so it should come as no surprise to investors to experience some volatility in the fall. This September the US “Debt Ceiling” headlines resurfaced in parallel with well-foreshadowed news that the US Federal Reserve would begin to taper its bond-buying program which has provided tremendous liquidity for markets since the COVID-19 Pandemic first struck. The
decision to ease support for the markets is based off of several economic factors that point to a strong recovery underway in the US. Those of you that have resumed US travel recently will note that life in the US is clearly back to business as usual.

North of the border the story remains mixed, as Canadian provinces continue to struggle with differing infection rates and governments continue to introduce enhanced protocols for resuming daily life. Meanwhile, several sectors of the Canadian economy continue to struggle with labour shortages, supply chain disruptions and occasionally confusing public policy decisions. As the world moves on from the COVID-19 pandemic Global Oil demand is increasing and adding fuel to the Canadian stock market, despite our own economic struggles at home.

The Canadian dollar (CAD) fell 2.8% during the quarter after peaking a few days into the quarter and then trending lower. The Loonie continues to be highly correlated with the price of oil so it’s likely we’ll see some sort of recovery soon as both the Loonie and oil bottomed on August 23rd, but since then oil (WTIC) has rallied 21.5%, whereas the Loonie has appreciated 1.1%.

Bonds had another negative quarter as the Canadian Universe Bond Index fell 0.7%, increasing the losses on the year to 4.3%. We continue to minimize our bond holdings and replace them with our private investment pools, which benefit from inflation and are uncorrelated to stocks. The result is a less volatile portfolio with better downside protection than portfolios with traditional fixed income.

-The Gilman Deters Team

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