September 13, 2024 Newsletter

Dear Friends,

Tangents: Happy Friday.

September 13, 1759: The Battle of Quebec is fought between the British and the French.
September 13, 1814: Star-Spangled Banner inspired by the attack on Fort McHenry.
On Sept. 13, 1993, at the White House, Israeli Prime Minister Yitzhak Rabin and PLO chairman Yasser Arafat shook hands after signing an accord granting limited Palestinian autonomy. Go to article >>

‘Potentially hazardous’ asteroid the size of a skyscraper to skim past Earth on Tuesday
The gigantic asteroid 2024 ON, about the size of a skyscraper, will fly close to Earth next Tuesday, missing our planet by 2.6 times the distance between Earth and the moon. Read More.

2,300-year-old Celtic helmet discovered in Poland
Archaeologists think the ancient helmet indicates that Celts settled in the region to protect their supplies of precious amber. Read More.

1st tardigrade fossils ever discovered hint at how they survived Earth’s biggest mass extinction
Detailed 3D images of the first tardigrade fossils ever discovered help scientists predict when tardigrades evolved their near-indestructibility — a trait that might have helped them survive multiple mass extinctions. Read More.

‘Springy’ solid-state battery is twice the width of a white blood cell and could drastically increase EV range
Scientists in the U.S. have created a battery for electric cars that could be safer and offer better performance than the ones we have now thanks to a unique design. Read More.

Mesmerizing images from Astronomy Photographer of the Year contest
The phases of Venus, the Aurora Australis and the International Space Station transiting the Sun all feature as category winners in the Astronomy Photographer of the Year competition.

McDonald’s $5 value meal is sticking around until December
The fast-food giant is trying to beef up sales with a slew of fall deals.

PHOTOS OF THE DAY

Skyscapes winner: Tasman Gems, by Tom Rae
This photograph shows the rugged peaks of the Tasman valley reaching up to the impressive features of the southern hemisphere summer night sky. It includes the hydrogen clouds of the Gum nebula – the central red region – and various other regions of active star formation stretching throughout the fainter arms of the Milky Way

A kingfisher shows its disdain for pettifogging rules in Kidderminster, UK
Photograph: Lee Hudson/Alamy Live News

Mauve stinger jellyfish swim in Sennen Cove, Cornwall, UK. Millions of the jellyfish, which have a painful sting, have invaded beaches in southwestern England after being blown in by a freak wind.
Photograph: Wallsofwater Photography/Animal News Agency
Market Closes for September 13^th, 2024

International Markets

Bonds

Currencies

Commodities

Market Commentary:
📈 On this day in 1970, the economist Milton Friedman published an article in the New York Times arguing “The Social Responsibility of Business Is to Increase Its Profits.” Friedman’s shareholder-value doctrine would come to dominate corporate thinking for decades
Canada
By Bloomberg Automation
(Bloomberg) — The S&P/TSX Composite rose for the third day, climbing 0.4%, or 93.51 to 23,568.65 in Toronto.
Today, materials stocks led the market higher, as 9 of 11 sectors gained; 169 of 226 shares rose, while 55 fell.
Shopify Inc. contributed the most to the index gain, increasing 1.7%.
New Gold Inc. had the largest increase, rising 7.4%.
Insights
* This year, the index rose 12%, heading for the best year since 2021
* This quarter, the index rose 7.7%, heading for the biggest advance since the second quarter of 2021
* So far this week, the index rose 3.5%, heading for the biggest advance since the week ended Nov. 3
* The index advanced 16% in the past 52 weeks. The MSCI AC Americas Index gained 25% in the same period
* The S&P/TSX Composite is at its 52-week high and 26.1% above its low on Oct. 27, 2023
* S&P/TSX Composite is trading at a price-to-earnings ratio of 18.9 on a trailing basis and 16.4 times estimated earnings of its members for the coming year
* The index’s dividend yield is 2.9% on a trailing 12-month basis
* S&P/TSX Composite’s members have a total market capitalization of C$3.72t
* 30-day price volatility fell to 13.62% compared with 14.63% in the previous session and the average of 14.32% over the past month
================================================================
|Index Points | |
Sector Name | Move | % Change | Adv/Dec
================================================================
Materials | 44.3018| 1.5| 48/4
Financials | 20.5330| 0.3| 19/8
Information Technology | 18.0675| 0.9| 8/2
Real Estate | 10.9540| 2.1| 19/1
Utilities | 8.7890| 0.9| 15/0
Communication Services | 2.7805| 0.4| 4/1
Health Care | 1.5310| 2.2| 4/0
Energy | 1.2347| 0.0| 25/15
Consumer Discretionary | 0.1250| 0.0| 9/3
Consumer Staples | -6.7904| -0.7| 3/8
Industrials | -8.0229| -0.3| 15/13
================================================================
| | |Volume VS| YTD
| Index | | 20D AVG | Change
Top Contributors |Points Move|% Change | (%) | (%)
================================================================
Shopify | 13.5200| 1.7| -28.1| -4.6
Agnico Eagle Mines Limited/Limitee | 6.3860| 1.7| 22.8| 55.6
TD Bank | 6.0670| 0.6| 25.2| -1.3
Canadian Pacific Kansas | -3.1280| -0.4| 13.5| 11.9
Dollarama | -3.2540| -1.2| 48.9| 39.8
RBC | -3.5590| -0.2| -38.3| 25.4
US
By Rita Nazareth
(Bloomberg) — Wall Street traders revived prospects for a half-point Federal Reserve rate cut next week, driving stocks to their best week in 2024 amid a rotation into companies that would benefit the most from policy easing.
Economically sensitive shares outperformed the group of tech mega caps that have led the bull market, with the Russell 2000 index of smaller firms climbing 2.5%.
An equal-weighted version of the S&P 500 — where the likes of Nvidia Corp. carry the same heft as Dollar Tree Inc. — beat the US equity benchmark.
That gauge is less impacted by the biggest companies— providing a glimpse of hope the rally will broaden out.
As the S&P 500 marched from one record to the next in the first half of the year, some investors grew concerned that only a handful of companies were participating in the rally.
Corners of the market outside of big tech are now barreling higher as investors grow more confident that the start of the Fed cutting cycle will further fuel Corporate America.
“The biggest news in the last 24 hours has been the shift in odds for a 50 basis-point cut at next week’s Fed meeting,” said Jonathan Krinsky at BTIG. “Small-caps offer better risk/reward in the near-term, and we think mega-cap tech likely sees another breather, although it will certainly participate if the S&P 500 makes new highs.”
The S&P 500 rose 0.5%, up for a fifth straight day.
Its equal-weighted version gained 1%.
The Dow Jones Industrial Average advanced 0.7%.
The Nasdaq 100 added 0.5%.
A gauge of the “Magnificent Seven” mega caps advanced 0.3%.
Treasury two-year yields dropped six basis points to 3.58%.
The likelihood of a 50-basis-point move climbed to 40% on Friday, up from as low as 4% earlier in the week.
The dollar fell.
Gold rose to another record.
To Neil Dutta at Renaissance Macro Research, the case for the Fed cutting more aggressively next week is strong.
“A popular reason to not go 50 is the message it would send: ‘The Fed must know something the rest of us don’t.’ I don’t buy this for a second,” Dutta says. “My own sense is that markets would welcome the move. It is a good thing that the Fed is trying to get onsides quickly.”
At JPMorgan Chase & Co., Michael Feroli says he’s sticking with his call that officials will do the “right thing” and cut a half-point.
Andrew Brenner at NatAlliance Securities says that while he thinks a 50 basis-point cut is the “right call,” he just can’t see “this Fed — who is so entrenched in backward-looking numbers — getting to 50.” “That is what we think, rather than we want,” Brenner noted.
Elias Haddad and Win Thin at Brown Brothers Harriman & Co., also believe the Fed is unlikely to slash rates as aggressively as implied by the money market.
“First, the US labor market is not falling out of bed. Second, US consumer spending is resilient. Third, underlying inflation is sticky. Fourth, financial conditions are loose,” they said.
In the event the Fed decides to go bigger, small caps would get a “significant rally” — and would still rally with a “very dovish 25,” said Eric Johnston at Cantor Fitzgerald.
Valuation still seems to favor small caps, and performance did little to move that dial, according to Simeon Hyman at ProShares.
“The anticipated Fed rate cut this month could be just the catalyst to realize this valuation-driven opportunity,” he said.
“Small-cap interest rate sensitivity is one of the most widely accepted investment tenets, and a Fed rate cut cycle might deliver extra ‘oomph’ to small-caps this time around.”
Hyman noted that the rate sensitivity of small-cap stocks is largely attributable to the greater leverage of the cohort versus large firms — smaller companies typically have to borrow more money.
“That is clearly true today, with the Russell 2000 having nearly triple the leverage of the S&P 500,” he says. “By itself, that difference is more than sufficient to point to small caps being outsized beneficiaries of rate cuts, as debt burden relief is typically more impactful for them.”
While there’s been a broader rotation under the surface of the market away from tech and communications and into more defensive corners, the one issue is that earnings growth at the top end of the market are still expected to exceed the rest of the index, according to Ryan Grabinski at Strategas.
“If growth becomes scarce and investors flock to growth, it wouldn’t surprise me to see the largest most liquid names get bid up again,” Grabinski said. “Certainly, they are facing court and regulatory challenges — but to be fair this is nothing new.
Getting too down on the ‘Magnificent Seven’ could pose a major risk to one’s portfolio.”
Basically put, with the growth expected from the ‘Mag Seven’, it makes them “difficult to fade,” he concluded.
“While cracks are developing in many of the long-time growth leaders, the overall technical picture still shows broader underlying participation than what usually accompanies a cyclical peak,” said Doug Ramsey at The Leuthold Group. “We continue to view this broadening as more likely a sign of a leadership change (from growth to value) than a harbinger of yet another leg higher in the blue-chip averages.”
After a couple years of technology stocks leading the market higher, investors in the last two months have shown an appetite for other sectors.
As a result, money flew into other corners of the market, including utilities, real estate, industrials and small-cap stocks.
The risk is that what seems like a rotation away from tech and artificial intelligence may not be much of one after all.
“This rotation has actually caused the death of diversification,” said Michael Landsberg, chief investment officer at Landsberg Bennett Private Wealth Management. “Many investors are adding artificial intelligence-centric stocks in the utilities, industrials and real estate sectors, and incorrectly thinking that they are properly diversified when they are actually still overly exposed to technology themes.”
Stock markets are likely to trade sideways until US employment data show clear signs of either weakening or strengthening, according to Bank of America Corp. strategists led by Michael Hartnett.
A clear direction for jobs would “resolve the autumn ambiguity,” Hartnett wrote in a note, after non-farm payrolls climbed by 142,000 in August, lower than economists’ expectations. “Until then, risk rotates rather than rips or retreats.”

Wall Street Gears Up for Fed:
* Jose Torres at Interactive Brokers: If the Fed does a 50 next week, we will likely see a dramatic bull-steepening of the yield curve alongside a bullish yen. Historical evidence points to a 25 being more favorable to risk assets, as a 50 will leave reporters in the room and investors behind their computers wondering if the central bank knows something they don’t. Finally, slow adjustments downward have been more friendly to equities than hasty moves south, with the former more supportive of soft landings and income stability. At the same time, the latter has been associated with economic stress and bottom-line weakness.
* Fawad Razaqzada at City Index and Forex.com:
Judging by price action, investors are certainly looking for a dovish rate decision. This could be in the form of a surprise 50 basis-point cut — or 25 basis-point cut, with a strong hint of at least one 50 basis-point reduction in the remaining two meetings later this year.
* Charlie McElligott at Nomura:
And this is the issue: Now that market is back pricing as much likelihood on the 50 as 25 basis-point cut out of the gates, then anything but 50 will disappointment market pricing.
* Ian Lyngen and Vail Hartman at BMO Capital Markets:
We maintain that a quarter-point initial cut is the path of least resistance, although it is clear that 50 basis points is on the table and will be part of the Fed’s conversation. We’re cognizant that CPI and PPI are likely to translate into a more benign move in core-PCE. As the Fed’s favored measure, the overall inflation profile will appear less concerning for policymakers and thereby allow the FOMC to focus on the labor market.
* Oscar Munoz and Gennadiy Goldberg at TD Securities:
Given our expectation for the Fed to send a generally dovish tone while delivering a 25bp rate cut to start the cycle, rates can continue to rally and the curve can continue to bull steepen. We favor buying dips in duration.
* Chris Low at FHN Financial:
Markets are torn right now between a 25bp cut and 50bp cut next week. We expect 25bp and will be focusing on the new Summary of Economic Projections. As long as inflation stays on a sustained path to 2%, the labor market will be what determines upcoming Fed policy decisions.

Corporate Highlights:
* United States Steel Corp. surged after the Washington Post reported President Joe Biden wouldn’t immediately move to block Nippon Steel Corp.’s takeover bid.
* Boeing Co. is at risk of losing its investment-grade credit rating as the embattled plane maker faces the prospect of a drawn-out strike by workers that will further disrupt production and cash flow.
* Oracle Corp. said annual revenue will rise to at least $104 billion in fiscal 2029, an optimistic signal on the growth prospects of the software maker’s cloud infrastructure business.
* CoreWeave, a cloud computing provider that’s among the hottest startups in the artificial intelligence race, is in talks to arrange a sale of existing shares valuing it at $23 billion, according to people with knowledge of the matter.
* Adobe Inc. delivered an outlook that failed to quell investor impatience for new artificial intelligence tools to start generating cash.

Some of the main moves in markets:
Stocks
* The S&P 500 rose 0.5% as of 4 p.m. New York time
* The Nasdaq 100 rose 0.5%
* The Dow Jones Industrial Average rose 0.7%
* The MSCI World Index rose 0.6%
* S&P 500 Equal Weighted Index rose 1%
* The Russell 2000 Index rose 2.5%
* Bloomberg Magnificent 7 Total Return Index rose 0.3%
Currencies
* The Bloomberg Dollar Spot Index fell 0.3%
* The euro was little changed at $1.1077
* The British pound was unchanged at $1.3124
* The Japanese yen rose 0.6% to 140.92 per dollar
Cryptocurrencies
* Bitcoin rose 2.6% to $59,735.38
* Ether rose 2.9% to $2,421.12
Bonds
* The yield on 10-year Treasuries declined two basis points to 3.66%
* Germany’s 10-year yield was little changed at 2.15%
* Britain’s 10-year yield declined one basis point to 3.77%
Commodities
* West Texas Intermediate crude rose 0.3% to $69.20 a barrel
* Spot gold rose 1% to $2,582.66 an ounce

This story was produced with the assistance of Bloomberg Automation.

Have  a wonderful weekend everyone.

Be magnificent!
As ever,

Carolann
Worrying is like paying a debt you don’t owe. –Mark Twain, 1835-1910.

Carolann Steinhoff, B.Sc., CFP®, CIM, CIWM
Senior Investment Advisor

Queensbury Securities Inc.,
St. Andrew’s Square,
Suite 340A, 730 View St.,
Victoria, B.C. V8W 3Y7

Tel: 778.430.5808
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www.carolannsteinhoff.com