Hard to hear

By Dian Cohen
Hard to hear
(Photo : Dian Cohen)

In the old reality, September was the month we all settled into our regular routines after vacation – back to work, back to school, back to the grind… No longer. The Great Resignation during the pandemic shows few signs of reversing. Mandatory calls to return to the office are being greeted with outright quitting or the new “quiet quitting” – people who want the paycheque but are not engaged — clocking out promptly at 5 p.m., only doing the basics, no working overtime.
September has always been a tough month in the stock market – both in the US and in Canada, the September Effect has been one of wealth destruction going back to the 1950s. Will this September be an exception? It may be. But then again, the markets have already taken a hit – the US market is down 20 per cent so far this year; Canadians are not as dramatic, but except for the energy sector, the Canadian market is also in correction territory. One doesn’t need a crystal ball to tell you that the next period of time will be bumpy and possibly grim.
Among the things to keep an eye on: Canada is benefitting less financially from the global demand for oil and gas despite being the sixth-largest crude oil producer and the fifth-largest natural gas producer in the world. Our various governments’ discouraging policies on oil, gas and pipeline development would be great for the environment if self-replenishing alternatives like solar and wind could pick up the slack. But they have not and may never be able to – we haven’t yet solved battery storage nor the fact that both wind and solar are intermittent. There may be other alternatives — geothermal heat is unlimited about 10 miles below our feet but not yet easy to harness. We know how to do nuclear energy but are scared of it.
Accordingly, demand for black gold will not likely peak for decades. Yet government policies dictate that oil and gas companies will not invest in new exploration and drilling even as demand is rising. Russia’s move to restrict gas delivery to Europe has forced them to return to coal – even worse for the environment. You’d think that less drilling means less oil, and less oil amid high demand means up is the only way for prices to go. They may, but when commodities have been “weaponized”, their prices become volatile and at the whim of political players — Saudi Arabia, Russia, United States.
Further from home considerations are these: Increased food and energy prices are wreaking havoc on less robust economies than ours – look for example at Sri Lanka’s civil distress and virtual collapse. The EU is facing the prospect of freezing in the dark this winter. If they ration energy for consumers, expect protest and political unrest. If they ration energy for industry, expect supply chain disruptions. Either way, it’s going to be harder for corporations to make money. That does not bode well for stock markets.
Then there’s China. It has been leading the charge in global growth for the last 30 years. We can’t count on them now. There are too many things moving in the wrong direction there: Covid lockdowns continue to disrupt supply chains. Xi Jinping is vying for “ruler for life”, a sharp divergence away from “rule by committee” – that could be decided at the Party Congress in mid-October. Chinese crackdowns on their own businesses and escalating animosities between them and the west don’t bode well for trade. Expect slowing global economic growth.
This may be hard to hear, but it’s good not to be deaf to it.

Dian Cohen, C.M., O.M., economist
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