Your portfolios in brief
Buying opportunities continued this week as several stocks are considered “cheap”. Disney is one of them, earning a more prominent place in our portfolios in recent sessions. Down 36% since the start of the year, the announcement of the closure of its parks last week as Hurricane Ian approached dangerously close to Orlando, sent the stock plummeting.
The company filed some interesting data in the last quarter as sales of the Parks, Experiences and Products division reached $7.4 billion, up 70% from the previous year. Disney’s diverse business model as well as the power of its franchise make it an appealing stock while its price still hasn’t returned to pre-pandemic highs.
Source : Investing.com
Market Brief
Investors were confident at the start of the week, as speculation grew that the global wave of disruptive monetary tightening may be winding down. Indeed, the latest monetary decisions from the Central Bank of Australia and New Zealand have offered a wave of optimism as they have raised interest rates by half as much as expected.
The most recent US data shows that the Fed’s decisions to fight inflation seems to be working and the Central Bank could become less aggressive in the long term. For example, manufacturing activity (ISM) fell in September to its lowest level in more than two years, construction spending slowed and job opening fell in September more than expected. In short, these latest data are encouraging for the markets, because they show that the latest monetary policies seem to be working.
"By creating a slowdown in these sectors, the Fed could decide to be less aggressive in its next hikes. This new data, despite being negative, shows that the Fed has managed to create a slowdown and thus could begin to stabilize inflation. Several analysts predict that the Fed could calm its rate hikes if the economic data is favourable. Bad news has become good news for the markets,” explains our president and portfolio manager Philippe Pratte.
Indeed, investors seem to be sailing on this opposition, that is, bad news more often becomes good news, as investors have priced in the risks of a recession while preparing for a bailout from the Fed Despite the fairly drastic fall in the indexes in recent months, the stock market expects its “priced-in” recession to be greeted by a pivot from the Fed, which should make market dips less likely . In other words, the market thinks the Fed’s put option is nearing the end.
“If the Fed succeeds in its” soft landing “objective, i.e., to counter inflation without putting the economy into recession, the market could rebound strongly due to the fact that the most pessimistic scenarios already seem to be priced in” adds Philippe Pratte.
Indeed, the new projections show normalization of both GDP and CPI in the upcoming quarters. The markets seem to be waiting for the CPI to be released next week and the start of the quarterly earnings season which will really start next week with the major US banks.
Despite encouraging U.S. jobs data on Friday, markets are obsessed with the drop in the jobless rate, which came in at 3.5%, estimated at 3.7% and was also at 3.7% back in August. Indeed, the latest numbers published on Friday show that the American economy created 263,000 jobs in September, against 315,000 in August, slightly less than the 275,000 announced by economists. Markets fell on Friday following the release of the data, as investors expect another interest rate hike from the Fed.
Here is the average for the week of the three main indexes at 1 p.m. Friday.
Dow
S&P 500
NASDAQ
And here's the average for the week for the TSX in Canada.
Oil
OPEC + member countries have agreed to a cut “two million barrels per day” for the month of November, its largest reduction since the start of the pandemic. This decision will increase prices at the pump, a difficult blow for consumers who are once again seeing their wallets empty.
President Biden was disappointed with this decision, he who has tried in recent months to put pressure on the group to lower prices at the pump. “In light of today’s action, the Biden Administration will also consult with Congress on additional tools and authorities to reduce OPEC’s control over energy prices,” the White House said.
White House officials believe that with this decision, OPEC is aligning itself with Russia, while this reduction will increase prices allowing Russia to collect more money to finance its war in Ukraine.
While OPEC's primary mission is to ensure an adequate price environment for consumers and producers, for many analysts this new cut runs counter to that goal. Thus, the group is demonstrating that it is focusing more on price rather than stability, which benefits producers more than consumers.
Oil prices were hovering around $80 on Wednesday, a significant drop from its June high of $120 a barrel.
Pratte Portfolio Management is a firm registered with the Autorité des marchés financiers (AMF) and the Ontario Securities Commission (OSC).
This newsletter is intended to provide general market and security information and is not intended to address your specific needs. The views (including recommendations, if any) expressed in this newsletter are those of the author only and do not necessarily represent those of Pratte Asset Management and do not constitute investment advice for your specific needs.
The information contained in this report is derived from sources believed to be reliable, but the accuracy and completeness of this information can not be guaranteed and, in providing the information, the author and Pratte Portfolio Management assume no liability whatsoever. This information was current as of the date indicated in this bulletin, and neither the author nor Pratte Portfolio Management assumes any obligation to update it or to report any new developments with respect to this information. This report is intended for distribution in jurisdictions where the author and Pratte Portfolio Management are registered for trading in securities. Any distribution or diffusion of this report in another territory is forbidden. The author, Pratte Portfolio Management, its affiliates and their respective directors, officers and employees, and the companies with which they are associated may, from time to time, hold securities referred to in this report.
