Hello everyone,
Well, it looks like the dice rolled in our favour again. LOL. The S&P 500 is up 2.42% (https://ycharts.com/indices/%5ESPX/level) and the TSX up 1.10% for the month of October. Not bad I guess, despite ongoing concerns about trade tensions, inflation, and a weak labor market. Why? Investors remain optimistic, primarily driven by strong corporate earnings and resilient consumer spending. Solid company fundamentals have provided underlying support for equities, helping markets to rebound quickly after volatility earlier in the year (https://www.usbank.com/investing/financial-perspectives/market-news/is-a-market-correction-coming.html).
Additionally, promising signs of progress in a US-China trade deal have boosted market sentiment. Recent positive developments from negotiations have alleviated fears around tariffs, which previously contributed to market uncertainty (https://finance.yahoo.com/news/live/stock-market-today-dow-sp-500-nasdaq-climb-as-trump-stokes-hopes-a-us-china-trade-deal-is-near-225050085.html, https://www.marketwatch.com/livecoverage/stock-market-today-dow-set-for-200-point-rise-s-p-500-and-nasdaq-to-pop-on-china-talks?gaa_at=eafs&gaa_n=AWEtsqcFhXTUsoaixlSwUbFyVi_n3BS2NQQ-q4IO041S3lKVet6lr_h1bsAI&gaa_ts=68ff89fe&gaa_sig=mkIr7ip-). This optimism has led to fresh record highs in major indexes such as the S&P 500, Dow, and Nasdaq at the start of the month (https://www.cnbc.com/2025/10/17/stock-market-next-week-outlook-for-oct-20-24-2025.html).
Furthermore, the Federal Reserve's anticipated policy decisions and steady inflation data have played a role with investors interpreting these signals as supportive for continued economic growth without aggressive tightening (https://blog.carnegieinvest.com/monthly-market-commentary-october-2025).
Closer to home, Canadian financial markets have been up due to a combination of solid economic fundamentals, sector leadership, and investor optimism despite some global uncertainties. Strong gains in sectors such as basic materials, financials, energy, and technology have propelled the market forward, contributing to double-digit gains in the third quarter that built momentum into October (https://global.morningstar.com/en-ca/markets/canadian-stock-market-powers-through-tariff-uncertainty-record-highs-q3).
The Canadian economy has shown signs of resilience, with recent labour and inflation data aligning closely with expectations, which has helped stabilize investor confidence. Pat on the back for us! Inflation in Canada remains near the Bank of Canada’s target, with a slight increase to 2.4% in September, but this has been viewed as manageable within the economic outlook (https://www150.statcan.gc.ca/n1/pub/36-28-0001/2025010/article/00004-eng.htm, https://www.reuters.com/business/tsx-futures-dip-commodity-prices-weaken-eyes-cpi-data-2025-10-21/). Additionally, solid consumer spending, improving household finances, and wealth expansion have supported market sentiment (https://www150.statcan.gc.ca/n1/pub/36-28-0001/2025010/article/00004-eng.htm).
Investors are also responding positively to government initiatives like Budget 2025, which includes investments in Canadian workers, reflecting a broader supportive policy environment (https://www.canada.ca/en/department-finance/news/2025/10/budget-2025-to-invest-in-canadian-workers.html). Despite your political views, a can of worms I don't want to open, we are moving forward as a nation with a term I'm coining "Build, Baby Build". Furthermore, Canada's small-cap sector has drawn attention as a compelling area for growth. Ironic, given the attack on our Nation by US policymakers, mainly around tariffs and now the uncertainties surrounding on how a U.S. government shutdown impacts global markets.(https://finance.yahoo.com/news/spotlighting-canadas-undiscovered-gems-october-123312594.html). It just seems to me that all of our problems stem from what or who used to be our best friend! LOL….good grief!
But let's look at this a little closer at the shutdown and what it could possibly mean for us. If the U.S. federal government remains closed for an extended period, it can have several negative consequences for the economy and financial markets. A prolonged shutdown disrupts federal operations and reduces government spending, which is a significant component of Gross Domestic Product, potentially slowing overall economic growth. Many federal employees may be furloughed or work without pay, leading to decreased consumer spending and financial stress for these workers and their families, which in turn affects businesses reliant on consumer demand. Additionally, delays in government services such as Social Security payments, tax refunds, and small business loans can undermine consumer confidence and hinder business operations. The uncertainty caused by the shutdown typically reduces business confidence, causing companies to postpone investment, hiring, and expansion plans. Financial markets often respond negatively to prolonged shutdowns due to political instability and concerns about fiscal management, leading to increased volatility, falling stock prices, and higher risk premiums. Furthermore, fears surrounding the government's ability to manage its debt during an extended shutdown can trigger credit rating downgrades, raising borrowing costs and affecting financial markets broadly. And so, there you have it, given the central role of the U.S. economy and the dollar in global trade and finance, such a shutdown can create global economic uncertainty for everyone, further disrupting international trade and ultimately driving investment flows downwards but not just in Canada, worldwide.
All that said, we are in the middle of a technical bull market and remaining invested during these cycles, especially when supported by strong long-term fundamentals and robust technical indicators, is generally advisable. As of October 28th, 2025 the US had GDP growth at an annual rate of 3.80% in the second quarter of 2025 compared to its first quarter decline of 0.6% (https://www.bea.gov/news/2025/gross-domestic-product-2nd-quarter-2025-third-estimate-gdp-industry-corporate-profits). Corporate profitability and low inflation remain solid; and they too underpin market strength and reduce the risk of abrupt correction. Positive technical indicators, including moving averages and momentum signals, further support the continuation of the bullish trend. Lastly, staying invested also enables compounding returns over time, as exiting early may result in missing some of the best performing periods, which often occur late in bull markets. Additionally, successfully timing the market is notoriously difficult, even for me, so a disciplined investment approach helps avoid emotional decisions based on short-term noise. With proper diversification and risk management, we can manage downside risk while participating in market gains.
Looking ahead, historically, November has been one of the stronger months for financial markets, particularly in U.S. stock markets. It often marks the beginning of a favorable seasonal period, sometimes referred to as the "Santa Claus Rally" or the "Best Six Months" strategy, which includes the months from November through April.
November has tended to produce above-average positive returns for major indices like the S&P 500 and the Dow Jones Industrial Average, with gains more frequent than losses over the long term. This month typically kicks off a period of increased investor optimism, driven by factors such as strong corporate earnings ahead of year-end, the holiday shopping season boosting economic activity, and lower trading volumes that can amplify price movements. While November is generally positive, it can occasionally experience volatility due to geopolitical events, something we are used to now, earning surprises, or shifts in economic policy.
Overall, November has historically been a strong month for markets, marking the start of a generally favorable seasonal trend, though it should always be considered within the broader context of current market conditions and risks. So, to that end, I'm still in Vegas; in keeping with last month's theme, the odds seem to be in my favour! Lol.
Off topic, but extremely important, Remembrance Day is fast approaching. Remember to pause with deep gratitude and give heartfelt respect to honour the brave men and women of our armed forces, those who have served, those currently serving, and those who made the ultimate sacrifice. Their courage, dedication, and selflessness have protected the freedoms we hold dear and shaped the peace we often take for granted. We remember not only the battles fought but also the profound human cost borne by these heroes and their families. May their commitment inspire us to strive for a world where peace prevails, and their sacrifices are never forgotten. To all who have worn the uniform, thank you for your service, your valour, and your enduring legacy. We owe you more than words can express.
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