We only have to go back in March 2020 to find one of the best examples of the market going up when we least expect it. In March 2020, people were restricted from going to work and even driving their cars. The pandemic was just beginning and the effects were unknown. Yet the market made a bottom at the end of March 2020. I bring this up because we have had quite a few clients asking us why we should stay invested in the market today when almost all economists believe we are either going into recession or are already in a recession. To answer this question it is probably best to illustrate with historical data.

As you can see from the chart below, in all but one case since 1948 the market has bottomed before GDP growth bottomed. Equally important is that the average return after the market bottoms is 26% 12-months later. If history was to repeat itself, then we can assume that the market should have some reasonable returns between now and October 2023 (12 months after the market bottom).

Source: Russel Investments

Combine this with the fact that the bond market is telling us that the Federal Reserve is not only done raising rates but will potentially be cutting rates later on this year and you are setting up for a potentially good finish to 2023. I should also note that we are at the very beginning of the 2023 1^st quarter earnings season and so far, earnings have been considerably better than expected.

I have also included a piece from our CIBC Economics team entitled “If you don’t know where you are going”.

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

Have a great weekend.

Milan