Many of us were perched on the edge of our seats Wednesday February 1st, waiting to see how the markets would react to the Fed Chairman’s speech, after the 2-day FOMC meeting. While it was certainly no surprise that a further 25 basis point rate hike was announced, it was with some amazement that we witnessed the markets here and in the US swinging wildly into positive, triple-digit territory (Nasdaq/Dow/TSX), after being very much in the red all day.

Powell stated, “We can now say I think for the first time that the disinflationary process has started… we see it really in goods prices so far.” He went on to say, “Given our outlook, I don’t see us cutting rates this year… we’ll likely sit tight while the economic data catches up to policy.” Some predict there may be further rate increases, but of course that remains to be seen.

This comment by him, “My base case is that there will be positive growth this year…”, accompanied his view that the Fed can get inflation back down to 2%.

Since Canada makes up approximately 3% of the world’s capital markets, in the broader sense, this is why I will usually concentrate more on US economic data, in these commentary pieces.

I relayed to clients in mid-January, the good news that 2023 was off to a great start. As of January 31st, we saw further improvement with the S&P/TSX (Canada) up approximately +7.1% and the S&P500 (US) returning just over +6%. Obviously this is a rare occurrence for just one month, and while we can’t expect this very often, I’m more than pleased to see how it has buoyed everyone’s portfolio. Yet again we have an illustration demonstrating how important it is to stay in the market versus timing the market.

For this month ahead, I expect there will be news flashes that cause the market to jump around, but I’m hopeful for some smoother sailing overall.

Libby

 

 

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