October 06, 2021Money Economy Lifestyle In the news Weekly update
What's Happening Today - Oct 5
It’s October, which means that invariably I’m going to start hearing rumblings of the “October effect”, the idea that October is a terrible month for investing. It’s actually not. If you look at the statistics, September actually has the worst track record for average returns (this last one was a prime example). October gets a bad rap because there have been a few notably large corrections in the month, but the average is actually not bad. Fall is an interesting time of year in the markets. Generally there’s a lot of action: the lazy days of summer are behind us, everyone’s back at work, and most corporations are looking at their fiscal year-end. Makes for lots of data and the market can be reactive. Whether it’s the debt ceiling, supply shock, Evergrande, or C-19, there’s a lot of narratives being spun about why stocks have been defensive over the past few weeks. From a macro outlook, we’re still positive for the coming year, but that doesn’t mean we won’t have volatility.
Canada's exports rose 0.8% in August, while imports decreased 1.4%, which was nice to see. The government also just invoked a dispute resolution process from a 1977 treaty to keep the Line 5 pipeline in operation while negotiations with Washington continue. If you recall, this is the pipeline that Michigan Governor Whitmer attempted to shut down last year. Good timing, as the Americans are likely distracted by other issues.
Speaking of which, the U.S. and China are expected to hold high-level talks later this week in an effort to revive communication lines, while the U.S. is assessing potential actions against China over its noncompliance with the phase one trade deal and will not rule out new tariffs. In other news, the Fed released a statement that announces an independent review by the Office of Inspector General over whether trading activity by FOMC members was in compliance with ethics standards. Between this and the now infamous Schumer-Manchin July agreement, institutional trust in the Fed has taken an undeniable hit. Not a good look as we head into a period in which political encroachment risks will be VERY high. On a separate, Fed-related note, Axios reports that Republicans are warning Biden not to replace Powell with Brainard. See what I mean about political encroachment? Also, Biden just told progressive lawmakers that the top line figure for the social safety net bill will have to come down to $1.9-2.2trln. Finally, on the debt limit, Schumer says that he’ll file cloture on the House debt limit bill to extend the suspension of the ceiling until December 2022. Manchin says that Schumer shouldn’t rule anything out – including using reconciliation.
Across the pond, European equity markets opened marginally higher with some dip-buying of technology stocks and a stronger energy sector, but have become range-bound. The Eurozone composite PMI was a touch better in the final September reading but still slowed for second straight month.
Oil prices climbed, hitting their highest levels in at least three years following the OPEC decision to keep with current plan
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