And so the flight continues … without a hard landing, without even a soft landing , in fact so far with no landing at all! But ultimately there is a cost. Are higher bond yields an opportunity for investment or a forewarning?

As of June 30th growth in global markets, including Canada, continued, thus supporting the concept of a “soft Landing’ espoused by most central bankers over recent years.

Good economic and financial news breeds better total returns than the alternatives. At least that has been the case for the world stock markets during the first quarter of 2024.

2023 versus 2022 was a very good performance recovery year for most markets. Much of the positive market enthusiasm was exhibited in anticipation of central banks initiating cuts to interest rates starting in the first quarter of 2024.

This quarter has seen more negative effects of the recent accelerated increases in bond yields pressure stock prices of all dividend income sectors such as financials, utilities, telcos and pipelines which are often in direct competition with bonds for investors seeking income.

Money is (finally) getting tight. Are we more or less into a “soft landing”? If so then we should probably expect growth to continue but to be more uneven going forward. The economy has remained surprisingly strong in Q2 in the U.S and Canada despite higher interest rates relative to 2022. Employment remains strong while headline inflation has continued to fall although core inflation remains a challenge for the central banks as they have committed to continue raising interest rates this year.

Storm Clouds Clearing …but still some chance of Lightning and Thunder The latest (April 2023) level of 28.9 of the cyclically adjusted price-earnings (CAPE) ratio of the S&P is now well down from its November 2021 peak of 38.58 (historical references: Jan 1, 2000, =43.77; Jan 1 2010= 20.53).

Recession or no recession world economies have slowed in line with the new normal higher interest rates. 2022 was a year of economic drag; war, supply chain constraints, inflation and rising interest rates interrupted the previous years’ stronger growth trend and reversed low inflation. Stock and bond markets recovered somewhat in the fourth quarter after data showed slowing rates of inflation.

Globalization in the world economy may not be crumbling but it is cracked. Covid, war and all their side effects have caused a shift in the investment choice for business towards “onshoring” which is the process of sourcing or relocating a business’ production operations within domestic national borders. This usually raises costs and therefore workplace efficiencies and technologies become more crucial to profitability.

Q2 = BIG INFLATION and small (if any) growth = stagflation! During Q2 the multiples compression stage of the bear market, driven by entrenched inflation and monetary tightening, was likely already coming to a close as we entered Q3. Now all eyes are on growth and the ability of companies to navigate the economy that is being slowed down by the Fed in the U.S., the Bank of Canada and other central banks around the globe (in addition to the war in Ukraine and continued Covid shutdowns in China).

Up versus down is not always the direction of choice as became evident this year. In Q1 inflation and interest rates worldwide have spiked upwards and are widely believed to be heading higher for the duration of 2022.

The central banks have clearly been a pillar of support for years with low interest rates and quantitative easing for the economy and markets in recent years that resulted in 2021 markets having low volatility. One might describe the past year’s stock markets by the old adage “a rising tide that lifted all boats”. However now inflation is out front and warning signs are flashing.

Economic growth is continuing to fuel corporate earnings growth in global markets. Commodity and building materials of all kinds including technology supplies from the commodity and building materials of all kinds including technology supplies from the computer chips all the way up the food chain have experienced either supply shortages or price increases or both.

The stock market optimism continued in Q2 as prelude to another post-quarter-period of analysts’ quarterly earnings estimates being broadly beaten by great actual eps announcements. In Q1 a burst of growth at 6.4% brought the U.S. economy to just a hair below its pre-pandemic size; that growth continued in Q2, and according to the U.S. Commerce Department accelerated to a growth rate of 6.5%.

Clearly the global stock markets during 2020 and so far in 2021 continue to look ahead to increasing global growth. In Canada early indications of the Canadian economy's performance in March continue to signal strong growth occurred in between the second and third waves of the virus.

The 3.5% drop in U.S Gross domestic product in 2020 was the biggest drop since 1946. That followed 2.2% growth in 2019 and was the first annual decline in GDP since the 2007-09 Great Recession.

As we all know Covid-19 is still among us so PLEASE STAY SAFE>….. Slower growth …lower rates … more volatility ….?

What a difference a quarter makes as markets have recovered most of what they gave up in Q1. It is widely accepted that the state of the economy begins and ends with how the virus is being controlled.

Working from home this morning I was disturbed by another Purolator delivery which I cautiously received at my front door and promptly engaged in my “de-risking process”- carried the box to the “basement clean room” and wiped it down, opened it up and crushed and stored the box in the re-cycle bin. Then washed and wondered for about 3 seconds: am I ok? Sure I am.