Radio Rallies & Reversals

September is historically a bad month for equities, but we just saw the S&P500 finish up positive 8.92%, its best September return since 1939, and the TSX Composite Index did pretty well also, finishing up 4.09%. So what's in store this month? Since 1928, October has tended to see positive returns for the S&P500 roughly 2/3rds of the time after a positive September. The average return being 1.8%. So what could drive markets this last quarter?

According to Credit Suisse Global Strategist, Andrew Garthwaite, look for round two of quantitative easing, which will: 1. drive down real bond yields; 2. give asset allocators money which they will partly invest in other assets; 3. result in a weaker US$, forcing other central banks to adopt quantitative easing; and 4. help postpone fiscal tightening. Where are the investment opportunities? Look to sectors and stocks with high free cash flow (i. e. dividends), and high leverage.

There's a full slate of potential marketing moving economic news this week including: the ISM Non-Manufacturing Index in the US tomorrow; European Union GDP on Wednesday, followed by the European Central Bank policy announcement on Thursday; and employment in both the US and Canada on Friday.

GB