In his Q3 Update, Portfolio Manager Simon Bowers discusses recent developments in the financial markets and the issues that should remain top of mind for investors.
Simon notes that in the third quarter, the ongoing bull market in both stocks and bonds continued, despite economic uncertainties. The two most significant developments during the quarter were political and economic in nature. Politically, Joe Biden’s decision not to seek re-election led to Kamala Harris becoming the Democratic candidate, energizing the election race. However, the outcome remains uncertain, and there are concerns about extremist rhetoric, particularly within a faction of the Republican base. The potential for civil unrest, especially if Donald Trump loses, remains a risk, though markets prefer clarity and would welcome a decisive result from either party.
On the economic front, the U.S. Federal Reserve cut interest rates for the first time in four years, signalling further reductions, while the Bank of Canada continued its rate-cutting policy. Some Canadian economists have raised concerns about a fragile labour market and called for more substantial cuts, potentially bringing rates down to 2.5%.
Beyond these headline events, economic nationalism and the rise of artificial intelligence (AI) stocks remain concerns. AI stocks have shown signs of a bubble, while economic nationalism is a trend that seems to be spreading across the globe.
In conclusion, Simon notes that while risks remain, markets have always faced challenges. Investors are reminded that timing the market is difficult, and staying invested long-term often brings more opportunity than attempting to avoid short-term risks.
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