Brooke Thackray, research analyst, Horizons ETF Management Canada

FOCUS: Seasonal investing and technical analysis

MARKET OUTLOOK:

Some economic data, such as employment, has been showing signs of a strong economy. However, there is an increasing number of economic reports being released that indicate that the economy is in trouble and is slowing down. It is only a matter of time before employment is affected. The stock market will likely respond negatively as the economy slows. At some point, the stock market will look ahead and anticipate a growing economy. Unfortunately, we are not at that point yet. To make matters worse, we are transitioning into September, which on average over the long-term has been the worst month of the year for the stock market. This is not a good backdrop for the stock market to move higher at this time.

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TOP PICKS:

Consumer Staples Select Sector SPDR Fund (XLP NYSEARCA)

The consumer staples sector tends to perform well in late summer and early autumn on a seasonal basis. At this time, the stock market tends to be more volatile and as a result, investors tend to prefer the defensive sectors of the stock market. One of the sectors of the stock market that tends to perform well at this time is the consumer staples sector. Look for this sector to outperform the S&P 500 up until late October.

Lockheed Martin (LMT NYSE)

One of the strongest months of the year for Lockheed Martin is September. From 1990 to 2021, Lockheed Martin produced an average gain of 1.9 per cent and has been positive 69 per cent of the time. Investor interest has picked up in Lockheed due to the Russia-Ukraine war. The risk to the stock price is if Russia and Ukraine were to enter into peace talks.

Emera (EMA TSX)

Emera has a strong seasonal period from Sept. 13 to Oct. 27. In this time period, from 1996 to 2021, Emera has produced an average gain of 3.8 per cent and has been positive 79 per cent of the time. Over the same time period, it has outperformed the S&P/TSX Composite Index 73 per cent of the time. Emera’s contracts with its customers are highly regulated, creating a stable source of income. Emera is a boring stock, but sometimes boring is good.