September 27, 2023 | portfolio managers' brief

Portfolio Managers’ Brief: September 2023

BY: Jason Ayres
A brief review of market conditions and how they are impacting the management decisions of our Investment Review Committee (IRC).



Market Performance:

Markets have been on a roller coaster ride since our last Brief with the major equity indices we track peaking in July, selling off in August, and rebounding slightly in September.

U.S. stocks: S&P 500 is up 14% YTD, NASDAQ at 35% YTD, while Canada’s TSX is up 3.50% YTD after a recovery as at the time of our recording.

However, we are seeing more selling into the end of September. Of note, September 19th to the 29th have historically represented the 10 worst trading days of the year historically.

Market Leaders:

This year’s market rally has been mainly driven by the “Magnificent Seven” stocks, but the Feds have poured cold water on their outperformance with their hawkish comments at their September policy meeting.

Market Breadth:

We mentioned the Russell 2000 showing broader stock participation in July, with a year-to-date rise of 12% at the time of our July Portfolio Managers’ Brief. However, it’s now only up by 2.30%.

Fixed Income Markets:

The XBB – Ishares Core Canadian Universe Bond Index ETF has declined 3.50% year to date.

The main culprit? Inflation. Both the U.S. and Canada are grappling with it, hinting at potential future rate hikes.


August’s CPI figures indicate rising inflation rates for both the U.S. (3.7%) and Canada (4.0%). Central Banks might have a challenge getting these rates down to their 2% target, leading investors to expect “higher rates for longer.”

Concerning Headlines:

Potential “Government Shutdown” looms with an October 1st deadline.

While historically government shutdowns have limited economic impact, it can influence investor behavior towards safer assets like bonds.

The UAW strike could affect the auto industry, with potential repercussions on vehicle prices and worker salaries further fueling inflationary pressures.

Central Bank Decisions:

Uncertainties, like the strike and potential shutdown, could lead to data gaps proving challenging for the data dependent Central Bankers

Fed Pause:

The pause announced during the FED meeting on September 20th was countered by a very hawkish upward revision to the Fed’s rate projections for 2024 and 2025. This has put added pressure on longer duration tech stocks and megacaps such as the “Magnificent Seven”. If current valuations reflected interest rates coming down, these stretched multiples may no longer be justified. As such, we have seen the sell off in stocks accelerate since our recording on the September 20th.

Stock Market Analysis:

At the time of our recording, the major indices like the S&P 500 and NASDAQ were consolidating but have since sold further. The TSX’s performance continues to lag its U.S. counterparts, with energy leading the rebound.

Fixed income, though underperforming, looks promising as rates climb, and bond prices drop.

Current Strategy:

For now we are staying the course:

  • We continue to hold funds that have more attractive historical risk to return metrics or upside/downside capture ratios
  • We continue to apply correlation and standard deviation analysis to screen which individual stocks, actively managed funds and etf’s should compliment one another, using the most recent data available as part of the optimization process. Finding uncorrelated securities can act as a type of hedge in uncertain markets helping to lower the overall volatility of a portfolio.
  • This ongoing market uncertainty and related volatility continues to favor the variety of option strategies we are using in certain portfolio models to enhance cashflow.

related posts

PART 2: PORTFOLIO MANAGERS’ BRIEF Conversation With Founder & CIO Richard Croft – October 2023
PART 2: PORTFOLIO MANAGERS’ BRIEF Conversation With Founder & CIO Richard Croft – October 2023

PART 2: PORTFOLIO MANAGERS’ BRIEF Conversation With Founder & CIO Richard Croft – October 2023

In this second part to my discussion with Richard Croft Founder & CIO, we discuss portfolio rebalancing and portfolio performance comparative to the stock market indices we track such as the S&P 500, Nasdaq and TSX as well as a brief outlook on our expectations for 2024.