The last two months of 2023 and most of 2024 have been good for the markets. Inflation worries are dissipating, US labour numbers are strong, commodity prices have surged, and copper hit its highest closing price in history. Most indices around the world have had positive returns this year (except for bonds) and, all things considered, the markets have had a pretty good run. So the question most people are asking us is "what happens now?".

 

To answer that question, we will use some physics and some history. First, as many of you have heard us talk about in our presentations, Newton's first law states that "An object in motion remains in motion at constant speed and in a straight line unless acted on by another force”. We believe the stock market is no different. When markets start to go up, they tend to continue to go up until something significant happens in the world or in the economy that disrupts its trajectory…

 

Second, we look at history. Historically, once bull markets begin, they tend to last for a long time. The chart below shows the beginning date of each of the previous 12 bull markets and the number of trading days that they persisted. As you can see, these previous bull markets lasted an average of 5.2 years. The bull market that we are currently in has only been active for 388 trading days –which, from a historical point of view, means that we’re likely still in the infancy of this current bull market.

 

There's always the risk of some major world event or economic surprise that changes this bull market’s trajectory, however, we believe Newton's first law and historical bull markets give us a good idea of where we've been and where we’re going. For now, investors may observe this bull market as being intact with the possibility of moving higher, while anticipating bonds participating later in the year when the Bank of Canada and Federal Reserve start to cut rates.

Source: Bloomberg Financial L.P., Data as of April 25, 2024.

 

I've also included a piece from our CIBC’s Investment Strategy Group entitled "Who do you believe?”

 

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

 

Have a great weekend.

 

Milan