A Comment -- General Comments From an Expert (A Commentary)

He wouldn't make too much out of seasonality in September, because on average the market declines 1%, though October sees more falls of 5% than any other month. However, October usually ends up. Also, this time, thgnis are different because of the number of rate hikes we've had. In 2004-6, we saw a similar rise in interest rates; the market traded up a year after the cycle started, and that's what's happening now. He can see a way to a positive market, but it's very, very dependent on data.

Defining Financial Market Sectors. The different financial sectors of the market can be categorized into 11 main sectors, each representing a distinct segment of the economy. Let's take a brief tour through one sector below. 

Communication Services: This sector brings together companies that facilitate communication and entertainment. It encompasses giants in the media and entertainment industry, as well as telecommunications and interactive media firms. From traditional broadcasters to streaming platforms, this sector captures the essence of modern connectivity and entertainment consumption.
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Much like last August, the market seemed to get a bit ahead of itself. The S&P 500 started this upward trend a month ago and hasn't broken that. Seasonally, August and September are two of the weakest months. We haven't seen a double-digit correction, but we have had mild volatility this year. We're just 4% off the peak, and no drop more than 8%, since the rally began last October.

The key question is whether this is just a temporary pullback and a rotation, or this is the beginning of a change in trend and a leading indicator of an upcoming recession? 

Inflation is trending lower, economy is still re-strengthening, interest rates and yields seem maxed out. A lot of moving parts right now.

We're at, or near, peak interest rates. Heading into the end of the year the economy's still stronger than expected, but with cooling inflation and resilient labour markets. For her, additional hikes from the Fed and BOC would be causing more inflation, rather than cooling it, at this point.

Most recessions don't come gradually, and things can change very quickly. Seeing those 2 consecutive quarters of GDP contraction, she still expects a mild recession heading into the end of 2023 and early 2024.

Time for investors to be cautious heading into the fall. Focus on defensive sectors, de-risking your portfolio. Look for quality, stable businesses that can weather a storm, even if it's just a mild one.

She's been taking profits in the tech space. Sees rotation from growth to value for the second half of the year. Be patient in adding tech. Still holding bigger names as able to weather a recession. Tech usually leads the recovery after a recession. Tech doesn't do as well when interest rates are rising. Will continue to see a bit of a cool off in that sector. Wait to add a position.

If you're a long-term investor, holding onto them is not a horrible thing. You can go through periods where they are underwater for 1-2 years. She's a more active manager, so she'll take profits when she sees them. Recently, she took profits on AMZN on valuation alone. At the end of the day, there's no harm in taking profits and waiting patiently for another entry point.

Potentially heading into a recession in Q4, she still really wants to be in quality companies with good, strong balance sheets. Stable, great businesses, not as volatile. Yes, you could squeeze some more juice out of other names, but she doesn't want the huge, rapid swings of volatility.

"Higher for longer" interest rates - theme from US Fed meeting last week in Jackson Hole. 
Question is how long interest rates will remain high.
J.Powell clear that "quarters" will measure decision time frames.
Believes J.Powell wants to be remembered as a solution to inflation. 
Not sure how markets are going to "soft land" - thinks its incorrect.
Does not think easy monetary policy will return until "pain" is felt on Wall Street & Main Street. 

Thoughts on Bank of Canada & Banking:
Planning for 1 more interest rate hike from Bank of Canada.
If US Fed raises interest rates, BOC will have no choice but to mirror.
Believes rally in Canadian bank stocks today not resilient.
Waiting for shares to fall with higher interest rates.
Bank of Nova Scotia offering value.

Next 2.5 years of J.Powell term will be pivotal on impacts of inflation.
Expecting hard line from US Fed on inflation to avoid any mistakes. 
"Higher for longer" interest rates should be investors expectation (until economy enters recession).
Believes inflation is going to be sticky, and an economic hard landing is unavoidable. 

Basic Investment Terms: Central Bank Put.

The term ‘put’ refers to an option to sell a security at a pre-specified price. This essentially puts a ‘floor’ on an asset value. This is what we mean when using the term ‘put’. The implication being that central banks and governments may have essentially put an unofficial floor on economic or financial markets.

What was interesting was not that just a single central bank acted aggressively in the Covid-19 crisis. Almost every central bank across the globe stepped up to help ensure markets functioned properly. Not only did they act quickly but they acted aggressively. The idea being if it is not enough, you might as well not bother at all and in turn err on the side of doing ‘too much’. It is clear that central banks took some key lessons from 2008.
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Tricky question. If he had a rule of 20x PE maximum, then he never would've bought Nvidia. Or consider the traditional car stocks which have traded at low PEs, but paid dividend, but that's very different from the growth and high PE of Tesla.

He learned from experience to own fewer stocks, because he made more money owning fewer stocks than many stocks. He has a rule to sell one stock before buying a new name.

An economic slowdown will continue, so fade the cyclicals. Avoid companies with weak credit ratings and balance sheets, because rates have shot up. Earnings last month were great, not as weak as expected, though down YOY in the US and Canada, though market sentiment shifted this month. September is known for seasonal weakness and past crashes.