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Milan Cacic

October 28, 2022

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GUESS WHAT FOLLOWS A BEAR MARKET?

Sir John Templeton once said, "bull markets follow bear markets and bear markets follow bull markets." Sometimes it doesn't have to be any more complicated than that.

 

The chart below shows the historical calendar returns of the S&P 500, the 10-year US treasury bond and a combination of the 60-40 portfolio (60% equities 40% bonds). As you can see in the table below, 2022 has been the worst year in history for the standard 60-40 portfolio. You can also see that it's been two consecutive years in a row where bonds have lost money. The last time bonds lost money two years in a row was in 1958. The extent of the loss in 1958 was only a few percent versus almost 20% in 2022.

 

If history is any indicator of what might happen next, then it is likely that yields have peaked, and bonds have made a bottom. I should also note that the Bank of Canada surprised all of us on Wednesday when they only raised interest rates 50 basis points when we were all expecting a 75-basis point hike. It would be significant if the US Federal Reserve on November 2 did the same thing!

 

S&P Table

Source: Charlie Bilello Twitter

 

I've also included a piece from our CIBC Economics team entitled “If it gets ugly, how ugly will it get? (The Week Ahead)”.

 

As always if you have any questions please feel free to give us a call at any time.

 

Have a great weekend.

 

Milan

 

 

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CIBC Private Wealth” consists of services provided by CIBC and certain of its subsidiaries through CIBC Private Banking; CIBC Private Investment Counsel, a division of CIBC Asset Management Inc. (“CAM”); CIBC Trust Corporation; and CIBC Wood Gundy, a division of CIBC World Markets Inc. (“WMI”). CIBC Private Banking provides solutions from CIBC Investor Services Inc. (“ISI”), CAM and credit products. CIBC Private Wealth services are available to qualified individuals. Insurance services are only available through CIBC Wood Gundy Financial Services Inc. In Quebec, insurance services are only available through CIBC Wood Gundy Financial Services (Quebec) Inc.


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