September Update
Here we are with the September update, which is a little behind when I would generally like to have these out. Through the summer, we’ve seen a rise in the Orion Fund's value, which has been relatively widespread. Our tech holdings drove some gains, while we also saw shares in companies like Cameco and our defence holdings. This is a positive development, because while the fund value is the highest it’s ever been, it’s not a scenario where the values are being propped up solely by one company or sector. In fact, there are a couple of holdings that have lagged through the last few weeks, and while that doesn’t specifically concern me (because I think that they are still good investments), it’s interesting to see the yin and yang of the portfolio and how it’s been constructed.
From a historical standpoint, September is not a strong month for stock market performance, and generally, we see things pick up toward the end of the year. This time has been different, though, with relatively good performance in the markets coming out of the summer, and some reduction of issues that have been a burden for investors. For example, we saw tariffs and trade as a significant market issue through the spring and much of the year's first half. We have either seen deals implemented or announced, or the market has just accepted that this is the new situation, and we have to deal with it. Either way, the markets are less roiled now on that topic than they were about 5/6 months ago. This bodes well for the markets as we head toward the final quarter.
The one piece of news that is harder to understand for some is that the news in Canada has not been good on the economic front. Reports show that the economy is shrinking because of tariffs and trade issues with the USA. As I mentioned earlier this summer, they will always be our largest trading partner, and that is unavoidable in my view. The economic issue also illustrates how difficult the Bank of Canada's job is in these situations. On one hand, we have the East, with a huge auto and steel sector severely impacted by the tariffs. On the other hand, we have the prairies and the west, where agriculture and energy are bigger factors. When we see reports of a recession, the reality is that we are somewhat insulated from that, at this point. It’s very different from the regional slowdown we saw after the oil price collapse in 2015, where the East held up well, but we were seeing significant issues out here.
What does this mean from an investing perspective? At this point, the Canadian stock market has performed very well. As I write this, the TSX has crested 30,000 for the first time. Clearly, not all sectors in Canada have been hit by the tariffs. Some sectors, such as materials and financials, have performed well. There is a lesson for investors here, though. The stock market is not the economy. While a few weeks back we saw prognostications of doom and gloom about the employment issue in the country, Canada is partway to a recession, if not already there, and a general negative outlook. The market has not reflected this sentiment at all. The bottom line for investors is that investing based on the day's news is not a great strategy for your portfolio. Those outlets need you to click the link or buy their newspaper. The goal for an investor is very different, though. It’s not that we are unconcerned with the day's news; it’s just that this alone doesn’t formulate our investment plans and strategies.
Until next month,
Vic
