Market Update: September 18th, 2023

Topics

1. Markets
2. Apple
3. Consumer
4. Inflation 

Markets

Markets are looking a little wobbly in September, which is historically the worst month of the year. On the flip side, September is historically the best month of the year to invest because the best 3 months are October, November, and December. 

Apple

There is some pessimism around the central banks and how stubborn they will be in raising rates going into the end of 2023. Also, Consumer Discretionary stocks continue to slide as Apple has about 14% since its peak in July. This is a loss of about $325 Billion or Two Netflixs. This is coming off reporting 3 straight quarters of year-over-year revenue declines. This is extremely rare for Apple, and we still don’t know if this is from a stretched consumer or because sales saw a COVID bump in 2020/2021 when people were given free money and had nothing to do. Most likely a little bit of both. 

Consumer

The consumer concern continues to grow, as interest rates and higher prices continue to grind us down.

These are US numbers but there are similar trends to that of Canada. This would not be as much of a concern if we were not sitting at very low unemployment. These delinquencies are a delayed metric and do not reflect the rise in unemployment in August. Therefore, we would expect these numbers to likely increase if unemployment continues to rise. Job offers in the US have rolled over and there is no reason for a spike in the coming months. Without a change to expansionary policy.

US Job Offers 5-year Chart:

Inflation 

Core inflation in the US and Canada continued to fall, which excludes energy and food. Used vehicles continue to fall, new vehicles are flat from this time last year. Apparel is up 3% vs. last year and energy is down quite a bit from last summer after the initial disruption of the Russia/Ukraine war. The biggest driver remains Shelter as it continues to inch higher and higher every month, even as housing prices decline. This will eventually turn down as long as housing prices continue to decline. If you were ever wondering how close the growth of CPI Shelter and the growth in House Prices are correlated see below:

Going Forward 

Economies are slowing, Canada is bordering a shallow recession, and rates remain high. Through all this, the consumer remains resilient and while delinquencies grow, they are not at breaking levels yet. But, this month the US restarts student loan payments to see how resilient we are. The majority are managing but month by month things get tighter as we go on. Surprisingly, we are hanging on well, but that is a very pleasant surprise and can continue to hang on if people continue to make rational spending choices. 

Justin, Konrad, and Merriel

More articles and information are available at www.lkwealth.ca

Content Sources: Bloomberg, Trading Economics, Yahoo Finance, BCA Research

Disclaimer: This newsletter is solely the work of Justin Lim and Konrad Kopacz for the private information of their clients. Although the author is a registered Investment Advisor with Echelon Wealth Partners Inc. (“Echelon”) this is not an official publication of Echelon, and the author is not an Echelon research analyst. The views (including any recommendations) expressed in this newsletter are those of the author alone, and they have not been approved by, and are not necessarily those of, Echelon.

Echelon Wealth Partners Inc. is a member of the Investment Industry Regulatory Organization of Canada and the Canadian Investor Protection Fund.

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 These estimates and expectations will prove to have been correct, and actual outcomes and results may differ materially from what is expressed, implied or projected in such forward-looking statements.

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