While today is supposedly called “Blue Monday”, as far as I’m concerned, there is good news out there! Not only is the sun shining but the stock markets both here and in the US have had a great start to the year. From January 1st to Friday the 13th, the S&P/TSX (Canada) was up +5.33%, while the S&P500 (US) climbed +4.16%.
Although the above data is certainly encouraging, I will remind clients that during the latter part of 2022, I spoke a lot about the need to temper expectations going into 2023 and I am still taking a cautionary stance. With another rate hike likely to happen here in Canada (possibly 25 basis points) on January 25th and probably in the US too (end of January), there could be a market pull-back, as the media ramps up the negative rhetoric and scrutiny once again turns to core inflation and other data. But like I always say, this too shall pass…
It is expected that economic growth will continue to slow (desired effect of higher interest rates) during the 1st half of 2023. RBC Economics (and I) believe inflation will continue to soften and global supply chains will become more normalized. In the latter half of 2023, risks related to corporate earnings may well persist but broadly, the markets should find firmer ground. A positive side to some of the pain we had to endure through 2022 is that valuations have broadly become more attractive. I will be looking to put excess dollars to good use as opportunities arise, but I feel there is no rush at this time. Knowing we’re getting far better rates on money market than even a year ago (and certainly better than sitting in a bank account), helps with the notion of “sitting on cash”.
For those interested in delving into what JP Morgan thinks about the year-ahead, including their top picks and strategies, I’ve attached their report here (disclosure). I like the way it’s organized and how they go about breaking down the different sectors, etc.
Chin up everyone – things are improving slowly but surely!
Libby
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* All rates, yields and prices are subject to change