The cusp?

Should you worry?

Monday morning investors opened their Bloomberg terminals to the latest news of global, climate and financial mayhem.

What a morning, on the first anniversary of the Israel-Hamas war.

Bond yields are soaring after a massive jobs report Friday. So maybe those US Fed cuts Mr. Market has been banking on ain’t coming. Oops. Meanwhile a Cat 3 (or 4) hurricane is hurtling towards the US a week after Helene trashed the heartland, killing hundreds. Iron fences and surveillance cameras are going up as the US prepares for election chaos. Russia has taken a key Ukrainian city after two years of death and injury. Hamas had fired more rockets into Israel while Netanyahu ponders how to attack Iran. And some flipper in Toronto made headlines by suffering a $845,000 loss.

Welcome to Q4 of 2024. As this pathetic blog has opined in the past, these may be some of the rockiest days of our recent lives.

Last week’s American employment numbers sullied the narrative of a soft landing, sustained rate cuts and a revival for Canada’s housing market. Bond prices are falling and yields rising now as traders bet on sustained growth, not an economy cooling off in an orderly way. So the greenback rose and the loonie fell. The yield on Canada 5 bonds (which dictate fixed mortgage rates) has spiked by a full half-point. Have we hit the bottom for home loans?

A roaring US GDP and jobs surge helps Harris and hurts Trump’s theme of decay and eating-the-dogs disaster. Despite that, polls remain locked in a dead heat. The polarization grows deeper. The fears of pre and post-election unrest, possibly violence, grow. Will the transfer of power be peaceful if MAGA loses? Doubts are everywhere.

Globally, a divided America looks like a weakened one to adversaries – especially in light of Trump’s avowed policy of isolationism and the prospect of a gutted NATO. America-first trade barriers would likely bring world recession, says TD economist Tom Feltmate, along with new inflation and higher rates in the US. They would also whack Canada.

And, of course, October traditionally sucks. One of the most volatile months of the year, enhanced with an historic election at its conclusion. There’s even an official ‘October effect’ defined as “the psychological anticipation that financial declines and stock market crashes are more likely to occur during this month than any other month”. Nobody over the age of fifty is likely to forget October 19th in the year that we got ‘Walk Like an Egyptian.’

So, is this a cusp moment?

Have we tipped into some serious climate change mess now that the Gulf of Mexico is like a bathtub and incubating US-trashing superstorms? Is the Middle East tipping into a decade or two of escalating conflict as two peoples try to eliminate each other? Is this the cusp of a new Russian advance on its neighbours as a popular strongman works to recreate the USSR? Is this the year when American democracy cracks in a cultural divide as deep as that of the Civil War? Will NATO or the global economy survive as we know them if the US goes isolationist, as it did before WW1? Is this the beginning of AI eating millions of jobs in a society wholly unprepared for mass indolence? And have we reached the cusp of capitalism’s demise as wealth inequality gaps as never before?

Dunno. Neither do you. Or anyone.

But, as prophesied, Q4 of this year is going to be quite a ride. A ton of risk may be taken off the table soon, only to be heaped on just before Christmas. Your portfolio will feel like it’s having a colonoscopy with a two-by-four.

What to do? Two words.

Don’t look.

About the picture: “Meet Luna,” writes Caroline, in the GTA. “She is a 6 year old silver golden doodle that we rescued at 9 month old. She is by far the most loving and sweetest girl we’ve ever had.”

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.

Source: https://www.greaterfool.ca/2024/10/07/the-cusp/