I would like to take this opportunity to welcome everyone to our newest publication The Market Minute. Here we will provide a brief summary of the highlights in the stock market over the past month. As a former Professional Stock Trader who worked through the 1987 Black Monday Crash, 1989 United Airlines Mini Crash, 1997Global Mini Crash, 2000 Dot.com Bubble and the 2008 Financial Crisis I can safely say that I have seen, lived and traded some volatile markets.
The Bank of Canada held its target for the overnight rate at the lower bound of ¼ percent, with the Bank Rate at ½ percent and the deposit rate at ¼ percent. The Bank’s forward guidance on the path for the overnight rate is being maintained. The Bank is ending quantitative easing (QE) and moving into the reinvestment phase, during which it will purchase Government of Canada bonds solely to replace maturing bonds. Short-term rate expectations spiked on the announcement, pushing the Canadian 2-year government bond yield over 1%.
Crude oil has risen to over $83 a barrel creating higher prices for gas and inflation for many goods. Motorist are feeling the pinch at the pump with gas prices in some parts of the USA experiencing over $5 a gallon and $1.50 plus a litre in Canada.
Supply chains around the globe are in chaos with hundreds of ships off shore waiting to unload. Vaccine hesitancy has kept many workers away from the docks along with truck drivers needed to move the goods to market. The USA is reporting a shortage of 80,000 truck drivers. We expect the effects of the Supply Chain backlog to carry out for many years.
Bitcoin has been moving higher with the creation of the first Bitcoin ETF. At the same time Jamie Dimon CEO of JP Morgan says Bitcoin is worthless. It will be interesting to see how this plays out. Our feeling is the Central Banks won’t allow Crypto to become the dominant form of Currency.
The price of Gold flirted with $1800 and briefly moved above it’s 50-day moving average then declined again leaving the technical picture murky. Capitalight Research publishes weekly the Gold Monitor written by Dr. Martin Murenbeeld who has over 40 years experience covering Gold.
Silver has been hovering around the $24 US level trading above it’s 50-day moving average of
$ 23.27 while experiencing resistance near it’s September’s highs of $24.82.
Watch a replay of our October 14, 2021 Silver Lining Webinar here.
The London Metal Exchange is running out of Metal. On October 21 it was reported that available copper inventories at LME warehouses had fallen below 20,000 tons -- less than China’s factories consume in one day. On October 20 Copper traded at $4.75 lb. near it’s 52-week high. Capitalight Research's outlook for copper, nickel, lithium, and rare earth minerals can be found in our monthly Critical Metals for a Sustainable World publication written by Patricia Mohr.
There is no doubt that inflation is in an uptrend; most measures haven’t been this high in many years. Everything from strong consumer demand, monetary and fiscal policy, and surging asset prices point to higher inflation for the time being (and the “time being” is stretching well into 2023). Consumer prices, producer prices and personal consumption expenditures indices are all at multi-year highs. These are also at new highs for the 11-year period charted. One factor pushing these inflation rates upwards is supply shortages – everything from computer chips to raw labor.
Did you know that along with gold, silver and other traditional inflation hedges that Preferred shares can also be a good inflation hedge? Nick Otton Head of Canadian Preferred Share Research for Capitalight publishes detailed reports on individual companies and sector allocation suggestions within the Canadian Preferred Share Market.
Equity markets continue to climb higher with the S&P 500 index gaining 5.7% in October, brining the year-to-date increase to 22.6%. And the TSX Composite index gained 4.4% for the month, with a year-to-date gain of 20.7%. Our equity market valuation models can be found in the monthly Economic Monitor. This report also includes a deep dive into the current state of the Canadian and US economies.
Silver has formed a base around $23US. We feel the next move is to the upside and therefore owning Silver ETF’s would be a savvy way to maximize the trade with limited risk.
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Hope everyone has a happy and safe November!
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