Happy New Year! Well here we go again, we begin the year with soaring Omicron cases and a strong rotation from Tech to cyclicals. It appears that the market is now looking past any COVID issues and is focused solely on the Federal Reserve bank and what they are going to do with interest rates.

Regarding the soaring Omicrom cases, it may end up being good news as it has overtaken from Delta which appears to be much more deadly. The CDC has estimated that New York cases will peak on January 9^th. If this turns out to be true we should be able to use it as the playbook for the rest of our jurisdictions in North America as New York appears to be a few weeks ahead of most jurisdictions. Let’s hope it plays out and we can put this behind us like the market has!

Now lets focus on some history. The S&P 500 finished last year with almost a 27% gain. So the question we have to ask ourselves is how do markets perform the year after a market has gone up 27 or more percent?

As you can see from the chart below.  The S&P 500 has risen on average 12.2% the year after the market has gone up more than 27%.  If we don’t include pre 1938 we have an average return of 16.3% the year following a 27% rise.  Now history does not always repeat itself but it does give us some metrics to help us make non emotional decisions.

I have also include a piece from our CIBC Economics team entitled “Monthly World Markets Report”.

If you have any questions please feel free to give us a call.

Have a great weekend.

Milan