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September turned out exactly as advertised – it was a loser.

All the major North American indexes lost ground, led by tech-heavy Nasdaq, which slipped 5.2 per cent. The S&P 500 lost 3.9 per cent, the Dow was off 2.3 per cent, while the S&P/TSX Composite gave back 2.4 per cent.

None of this should have come as a surprise. I wrote at the beginning of September that the month is historically the worst performer of the year. It was just living up to its reputation.

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Here in Canada, most of the major sub-indexes were down, led by the beleaguered energy sector, which fell 18.2 per cent. That brought its loss for the year to a staggering 55.4 per cent.

Financials, the largest component of the TSX, was off 3.7 per cent. The Global Gold index was down 4.9 per cent. Telecoms gave back 1.5 per cent.

But there were a couple of bright spots amidst all the gloom. The utilities sector gained just over 6 per cent in September, pulling it into positive territory for the year.

We have several utilities stocks on our Recommended List, including Fortis Inc. (FTS-T), which just announced a dividend increase. Another way to invest in this sector is with the BMO Equal Weight Utilities Index ETF (ZUT-T). As of the end of August, it was showing a one-year return of 19.3 per cent and a 10-year average annual gain of 8.4 per cent. Not bad for what is normally considered to be a dull sector.

The star of the TSX in September was a sector that is too often overlooked: Consumer Staples. It was up almost 7 per cent for the month, bringing its year-to-date gain to 8.5 per cent.

This sector is composed mainly of companies in the food production or retailing business. They include familiar names like Loblaw Companies Ltd. (L-T), Metro Inc. (MRU-T), George Weston Ltd. (WN-T), Empire Company Ltd. (EMP.A-T), Maple Leaf Foods Inc. (MFI-T) and Alimentation Couche-Tard Inc. (ATD.B-T).

The pandemic has had a dramatic effect on their sales, as more people are eating at home and stocking up on supplies. Metro reported revenue of $5.8-billion in its latest quarter, up 11.6 per cent over the same period last year. Empire (Sobey’s, Farm Boy, FreshCo) had sales of $7.4-billion, a 9-per-cent increase. Loblaw Companies reported revenue of just under $12-billion, a year-over-year increase of 7.4 per cent.

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A good way to play the Canadian food sector is with iShares S&P/TSX Capped Consumer Staples Index ETF (XST-T). As of the end of September, it was showing a year-to-date gain of 9.4 per cent, and I expect it to continue to perform well, at least until the pandemic eases.

The fund owns 11 stocks in its portfolio. Alimentation Couche-Tard accounts for almost one-quarter of the total assets, followed by Metro (19.9 per cent), Loblaw Companies (14.2 per cent), and Saputo Inc. (9.8 per cent).

The fund was launched in April 2011 and has about $123 million in assets under management. The management expense ratio is 0.61%.

Distributions are paid quarterly and can vary significantly from one period to another. Over the past 12 months, payments have totalled 47.8 cents per unit for a trailing yield of 0.7 per cent. Obviously, this is not a good choice if you need steady income but if you’re looking for stability and modest capital gains potential in these strange times, this ETF is a decent choice. The units were trading on Monday at $68.43.

AND NOW, OCTOBER

September is history. Now, what about October?

Despite its bad reputation, the S&P 500 has averaged a modest average monthly gain of 0.4 per cent since 1928, according to Yardeni Research. Positive months have outnumbered negative ones by 54 to 38 over the period.

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But October also has a reputation for high volatility, going back to the Crash of 1929. The news that U.S. President Donald Trump has contracted COVID-19 and been admitted to hospital is may make this October even more volatile than usual.

Markets have taken the news calmly thus far. But what happens next week and beyond is uncertain and will depend in large part on the Mr. Trump’s recovery. If he rebounds quickly and avoids any major relapse, his supporters will breathe easier and investors will probably stay calm.

But if the disease should suddenly worsen, all bets are off.

The illness of a U.S. President is never good news for stocks. That’s especially true in this case. Whatever you may think of him personally, Mr. Trump is regarded as a friend by Wall Street. His moves to lower taxes and roll back regulations imposed by the Obama administration on a range of industries boosted corporate profits and drove share prices higher. The President had been focusing his campaign on rebuilding the economy during a second term, with some success.

Now the whole race for the White House has been plunged into chaos. With less than a month before election day, Mr. Trump has been sidelined for at least two weeks (assuming he follows the rules). His focus on the economy has been shattered. COVID-19 and his condition will dominate the headlines for most of the month.

Mr. Trump could well turn this to his advantage. Some undecided voters (if any remain) may cast a sympathy ballot for him, especially if his personal experience with the disease pushes him to take it more seriously and assume a strong leadership role in the fight to stop it. Unfortunately, his personality suggests he will do his best to shrug it off, insist that it is no worse than the flu, and go back to his old style of campaigning.

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Whatever the outcome, we are in for a period of even more uncertainty than we faced before the diagnosis. Even if Mr. Trump recovers fully, his refusal to agree to a peaceful transfer of power and his insistence the election process is rigged has pushed the U.S. to the edge of a precipice that could conceivably end in a hung election and street violence.

The typical reaction of many investors in times of great uncertainty is to take profits and move to the sidelines until things settle down. I suspect that’s what we will see this month.

The September market declines may just be a prelude to a wild October.

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