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Posted by Greg Taylor on Nov 1st, 2024

A Return to Reality

For parts of this year, investing felt a little too easy. And when things are too good to be true, that’s often a sign you should begin to prepare for something bad to happen. Since August, many have been on guard for some sort of volatility to enter the market. Yet, outside of a few one-off down days, it hasn’t shown up.

October 2024 market recap

So far, this year has surprised many market observers, as pretty much everything has worked. Equities are near all-time highs, bonds are doing ok, and even the safe haven gold is up. But the risk is that we might have gotten ahead of ourselves and priced in too many positives while ignoring the big risks in the market.

For most of this year, Investors have been sitting in cash, or fully hedged, waiting for a ‘dip’ to buy. But it never came. And every headline that caused markets to move higher increased the pain for those on the sidelines.

The problem with this latest rally is that all the positives priced in at these levels won’t all actually happen. Investors have begun to expect 1) no recession, 2) strong earnings, 3) aggressive rate cuts, and 4) massive China stimulus. While you can imagine a scenario in which some of those can occur, it’s almost impossible to have them all occur at the same time. That may have been the realization that markets are beginning to wake up too.

With the omnipresent US election on the horizon, many traders have stepped away from their keyboards for most of October, and volumes are being dominated by algorithmic trading and the options market. Betting sites are calling for Trump to win, and that outcome is now priced as another market positive. But when polls are this close, and there is so much uncertainty, who really wants to make a bet? It reminds me of the phrase ‘picking up nickels ahead of a steam roller.’

So, when bond yields began to creep higher through the month due to fears of more deficit spending, the risk in the overall market increased exponentially. Earnings season is just beginning, and it needs to be perfect. To date, that hasn’t been the case.

The result for October was a flattish performance for most markets, which feels like a loss after the strong gains to start the month. But it does allow those on the sidelines an opportunity to get back in.

There remains a bullish case for markets. The US economy remains strong, and we should get certainty from the US election. Valuations, while not cheap, aren’t expensive either. Dips will be bought, and a cushion should be provided for any selloff. The last part of October was not easy for investors, but it shouldn’t be. That isn’t a cause for concern; it’s more of a return to reality.

— Greg Taylor, CFA, is the Chief Investment Officer of Purpose Investments


All data sourced from Bloomberg unless otherwise noted.

By the numbers displays total returns for the month of October 2024. The content of this document is for informational purposes only and is not being provided in the context of an offering of any securities described herein, nor is it a recommendation or solicitation to buy, hold or sell any security. The information is not investment advice, nor is it tailored to the needs or circumstances of any investor. Information contained in this document is not, and under no circumstances is it to be construed as, an offering memorandum, prospectus, advertisement or public offering of securities. No securities commission or similar regulatory authority has reviewed this document and any representation to the contrary is an offence. Information contained in this document is believed to be accurate and reliable, however, we cannot guarantee that it is complete or current at all times. The information provided is subject to change without notice.

Commissions, trailing commissions, management fees and expenses all may be associated with investment funds. Please read the prospectus before investing. If the securities are purchased or sold on a stock exchange, you may pay more or receive less than the current net asset value. Investment funds are not guaranteed, their values change frequently, and past performance may not be repeated. Certain statements in this document are forward-looking. Forward-looking statements (“FLS”) are statements that are predictive in nature, depend on or refer to future events or conditions, or that include words such as “may,” “will,” “should,” “could,” “expect,” “anticipate,” intend,” “plan,” “believe,” “estimate” or other similar expressions. Statements that look forward in time or include anything other than historical information are subject to risks and uncertainties, and actual results, actions or events could differ materially from those set forth in the FLS. FLS are not guarantees of future performance and are by their nature based on numerous assumptions. Although the FLS contained in this document are based upon what Purpose Investments and the portfolio manager believe to be reasonable assumptions, Purpose Investments and the portfolio manager cannot assure that actual results will be consistent with these FLS. The reader is cautioned to consider the FLS carefully and not to place undue reliance on the FLS. Unless required by applicable law, it is not undertaken, and specifically disclaimed, that there is any intention or obligation to update or revise FLS, whether as a result of new information, future events or otherwise.

Greg Taylor, CFA

Greg Taylor is the Chief Investment Officer of Purpose Investments. A data-driven manager with a focus on managing risk through active-trading strategies, Greg specializes in finding and exploiting pockets of volatility in the market to drive returns. He spent more than 15 years managing pension and mutual fund assets at Aurion Capital Management. He also held a role of senior portfolio manager at Front Street Capital and LOGiQ Asset Management before coming to Purpose Investments.

Greg serves on the investment committee for the MS Society of Canada and advises the finance program’s portfolio management course at Bishop’s University. He has won numerous Brendan Wood International “TopGun” awards and is a regular host and guest on BNN Bloomberg and Toronto’s all-news radio station, 680News. Greg is a CFA Charterholder and has a BBA in Finance from Bishop’s University.