Investors have been lying in wait as the TSX today remains around the $20,000 mark. While this is still pretty far below its $22,213 52-week high, it’s also quite above its 52-week low of $18,169 as of writing. Yet in the last six months, the TSX has really not ventured very far off the $20,000 mark.
What does this tell us? That the TSX today is ripe for the picking, and here’s why.
Inflation and interest rates ease off
Inflation numbers recently came in for July 2023, showing inflation up 3.3% compared to 2022 levels. While this was an increase from June 2023, when inflation was up 2.8% from that time, it was still an improvement at core levels.
These core levels are what the Bank of Canada cares about, including the Consumer Price Index (CPI) trim and median. These are both measurements that take out the consideration of products which can vary from month to month. Instead, it looks at overall inflation as a whole.
In this respect, inflation is easing, up just 0.1% month over month. Therefore, the Bank of Canada should see this as a positive sign. While we are still likely to see another rate hike in September, it could mean that there are very few rate hikes left for Canadians.
Investors waiting for a chance
The $20,000 level on the TSX today then speaks to how investors are simply lying in wait to start buying up stocks once more. Sure, it’s the summer and many may be off on vacation. But really, with so much economic activity going on it’s unlikely that Canadians are ignoring portfolios altogether. And that includes institutions as well.
But there is an opportunity possibly coming, and that’s through the “September Effect.” This happens practically every September, when the market sees a drop around September. Blame it on Canadians rebalancing their portfolios after vacation, or portfolio managers doing the same, or even taking out cash for school. Whatever the case may be, it seems to happen. And could be more dramatic this year.
Looking back, the TSX dropped 3% in 2021 in September, and 7% in 2022. So this year it could double once more by around 15%! Should that happen, that opportunity investors are waiting for may just arise.
Stocks to watch
If you’ve been dying to get in on the action surrounding stocks on your watchlist on the TSX today, September could be the time to jump in. The TSX is already raring to go, but in September there could be a further drop that you’ll want to get in on.
Not to say that you’re going to see growth stocks rise once more, however. Which is why it’s a great time to consider blue-chip companies as long-term holds, with the potential of dividends as well. A great option in this case would be to consider a stock such as Manulife Financial (TSX:MFC).
Manulife stock has actually been performing better than the TSX today, with shares up 6% in the last year as of writing. Yet the insurance and asset manager is in value territory, trading at 5 times earnings! You can therefore pick up a dividend yield of 5.58% at a steal right now, or add it to your watchlist should a dip come your way.
Whatever you choose, make sure to keep your eye on the TSX today. There are changes coming that could influence your portfolio in the near future. Whether those changes are positive or negative is up to you.
