Is the Herd too Bearish?

 

In my previous Market Commentary “Wake Me Up When September Ends”, I explained that I would not be selling good quality stocks going into September but that I was holding a higher level of cash than normal in anticipation of lower prices ahead for companies I want to own.

September lived up to its reputation as the worst month of the year for stocks, dropping 4.90%. That followed a 2.4% decline in August.

Market sentiment is extremely Bearish at present. The recession concerns which began in 2022 continue to dominate financial headlines. Stocks have very real competition with the attractive yields available on Guaranteed or near Guaranteed fixed income investments.

I continue to advise clients add these fixed income securities. We have purchased more GICs and shorter-term Bonds in the last year than we have in the previous 15 years combined!

However, is the shunning of Stocks over done? Are there opportunities in this asset class right now?

I believe that October will present us with a buying opportunity on the quality companies we should own. The economy is strong with US unemployment below 4%. Inflation is falling and is now below 4% for the first-time post Covid. The ominous “Inverted Yield Curve “is “De-Inverting” (if that is even a word). It is far less inverted than it has been in well over a year.

The coast in never clear in Stock Market investing but perhaps today the view is a little less opaque. This October I will be buying the very best quality Canadian and US companies.

 

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