Sometimes when the volatility gets as high as it has been over the past few weeks, it's hard to know what to do. Fortunately, the market knows what to do! As you can see from the chart below, the market bounced off of its moving average and its trendline. Exactly where it's supposed to bounce off when we look at technical indicators. What was probably most surprising was the very steep slope of its V-shaped recovery.

The dramatic de-escalation of the tariff wars and the announcement of a 90-day pause has significantly reduced both the odds of a recession and stagflation. The abrupt turn of events caught many managers offside with regard to their investment positions. We have seen a steep drop in volatility and gold prices, along with a sharp increase in the tech market as portfolio managers scrambled to reposition. In the past few months, we have spoken about how difficult it is to time the market. This last three weeks is proof in the pudding.

For those that think that this is just a bear market rally, I suggest you take another look at the chart below. It's the same chart I used in my note last week. Whenever the S&P 500 has declined 15% or more in value, the subsequent 12-month return has averaged 52%. The S&P was down more than 21% at the end of April and has now recovered more than 15%. If history repeats itself, we have another 30-40% to go. Sitting on the sidelines and trying to time the market may be riskier than investing. We are fully invested in our models.

I have also attached some commentary from our CIBC Economics team entitled “Services, baby, services”.

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

Have a great long weekend.

Milan