“In the factory we make cosmetics; in the drugstore we sell hope.” Charles Revson
September was a month when the central banks lowered interest rates and sold the hope for continued economic growth. People hoped for lower inflation so the central banks could lower interest rates. Inflation is basically at the target level in both Canada and the US. The US Federal Reserve took decisive action and lowered rates by half a percent or 50 basis points in bank speak. The Bank of Canada lowered rates by a quarter of a percent for the third time. The People’s Bank of China made several steps to support the economy. The question is whether lower rates are enough to help the economy and the housing market. If lower rates do not induce increased activity the people did not buy the hope that was being offered by the central banks.
For a while we have looked at a portfolio skewed to dividend paying stocks and questioned when others might see the value we saw. As rates have begun to decline, interest sensitive stocks like the pipelines have started to rally. There is a phrase that you get paid to wait when you own a dividend paying stock. This means the dividend gives you a realized return while you wait for the capital appreciation on the investment. We remain focused on portfolios that have companies with steady dividends with the prospect of dividend growth. It is a portfolio, not a collection of stocks, so we include some stocks with different attributes as we want to avoid over concentration in one sector of the market.
