Canadian markets continued to show resilience to a global slowdown as the S&P/TSX hit a new record high. At the high, the index was within striking distance of 17,000 points, nearing a threshold that was unexpected at such a late stage in the business cycle.
Investors who were expecting renewed exuberance in the markets after the Federal Reserve cut interest rates on July 31st would have been disappointed given the negative monthly return on the S&P 500.
North American markets continued higher following last month’s reaction to the Federal Reserve’s softening tone allowing the S&P 500 and S&P/TSX to hit new highs.
Bond markets and stock markets usually move opposite to each other, hence their diversification benefits. Today, they appear to be indicating the same thing by moving strongly upward together. One of them must be wrong. Historically, the smart money is the bond market viewpoint. Yet today, central banks are distorting true risk and value by their market operations. The bond market is likely saying that recession is coming. This leads us to continue our shifts to a more defensive portfolio posture.
A number of positives helped global markets swell during the month, the largest of which was a dovish tone from the Federal Reserve meeting.