Well, that was a rough week…
Yikes! Global stocks are coming off their worst week since April. Yes, September is known for being a bad month in the markets (more on that below), but the recent weakness ranks right up there with some of the weaker examples we’ve seen in the past 25 years. And yet, there are still a lot of strategists I speak with who remain committed to equities.
They cite a range of factors, including the fact that corporate profits have been solid, that U.S interest rates are poised to come down (they are already coming down in Canada), that presidential election years are typically strong for stocks and, that at the end of the day, we remain in a bull market.
Plus, just looking back at the past month of trading for the S&P 500, you’ll find lots of encouraging trends tied to previous laggards, such as rate sensitive stocks. Financials standout, as do real estate names, which were actually positive last week.
So, see you in…October?
Staying on September for a moment… just a friendly reminder that history has not been kind to investors in the ninth month of the year.
Looking back at the past 20 years, the S&P 500 has gained ground in just 11 September periods. That translated into positive performance 55% of the time. When you average out monthly returns in those years, the S&P has tended to be negative by more than 0.5%, but note the past four September stretches have seen declines of around 4 percent or more.
If you’re seeking a silver lining, September showers could bring October flowers. 12 of the past 20 October periods have been positive, including two of the past three years. And average returns in those 20 years have been positive.
Tech’s long-term gains still golden
While tech hasn’t done much for investors lately, it remains a star performer over the long term.
Here’s some context on that…
This Month: Past 5 Years:
Tesla: -2% +1,277%
Adobe: -2% +98%
Apple: -4% +314%
Microsoft: -4% +187%
Amazon: -4% +86%
Meta: -4% +162%
Uber: -5% +114%
Netflix: -5% +127%
Spotify: -6% +138%
Alphabet: -8% +151%
Nvidia: -14% +2,188%
Will investors have conviction on their shift away from tech?
I hear this from a lot of you…that even though investors have been shifting away from tech, that the sector’s long term performance has been hard for other investments to match. If interest rates are going down, the AI transition is real and the bull market is going to continue, is it fair to ask how long investors will keep tech in the penalty box? Certainly seems so.
Meanwhile, here’s a look at what $10,000 invested in these tech stocks would’ve netted you over the past decade:
Nvidia: $2,059,483
Broadcom: $155,889
Tesla: $113,953
Amazon: $98,961
Netflix: $97,974
Apple: $89,245
Microsoft: $87,497
Adobe: $77,043
Meta: $64,751
Mastercard: $61,946
Visa: $52,160
Alphabet: $50,494
Sticking with defensive growth
I’ve shared the views of Jon Hirtle before. The Executive Chairman of Hirtle Callaghan & Co joined me again for a conversation this week and reiterated his call for defensive growth stocks.
His perspective is valuable, especially if you’re feeling uncertain about tech.
Hirtle has been increasingly cautious on AI names, but continues to invest in businesses that operate with more annuity-like revenue streams that enable them to be more resilient.
So he seems them as growth names, but with a defensive tilt.
His picks this week included Visa, Moody’s and Waste Management. You can see all his investment ideas in our picks section at the bottom of the newsletter.
Still bullish on gold
Bullion’s had a golden year. Even after the run-up, David Rosenberg of Rosenberg Research reiterated his buy call on gold this week. When we spoke, he noted the two main themes that are keeping him bullish are interest rates and the U.S. dollar. On interest rates, they are coming down globally and in Rosenberg’s view, the opportunity cost on gold is the coupon you receive from bonds. As those decline, the appeal of gold increases. Meanwhile, Rosenberg sees a bear market coming for the trade weighted dollar index and gold is priced in U.S. dollars.
Picks of the week
Jon Hirtle, Hirtle Callaghan & Co: Visa, Mastercard, Moodys, S&P, FICO, Waste Management
Paul Harris, Harris Douglas Asset Management: Novo Nordisk, MSCI, LVMH Moet Hennessy Louis Vuitton
David Burrows, Barometer Capital Management: Imperial Oil, Sprott Physical Gold Trust, JP Morgan
Rebecca Teltscher, Newhaven Asset Management: Brookfield Renewable Partners, TC Energy, Telus
Allan Small, IA Private Wealth: Alimentation Couche-Tard, AMD, TD Bank