Knowledge Centre

While concerns over the cost of rising interest rates and their impact on capital market expectations is certainly valid, history has shown that for Canadians in particular, it’s not the nail in the coffin as far as recessions go.

There are many investment indicators, strategies, anomalies and down right myths that influence investors strategies or trading patterns.

To put it plainly, 2022 has been exasperating for investors across all asset classes. Perhaps the most difficult result to deal with has been the performance of bonds which are coming off of their worst year in over half a century.

The Canadian stock market has rallied 10.4% since September 30th. After dramatic losses for the first three quarters of 2022, the market is only marginally down 1.0% year to date.

History has a way of repeating itself and history might be about to deliver a welcome relief from the equity market turmoil in the form of a turning point; in what, until now, has been a one-sided slide.

Interest rates have been steadily on the rise in Canada since the beginning of 2022 and the general consensus is that they still have a little way to go.

When investors discuss the worst month for stock market performance, most think of October. After all, October is the month Black Monday and Black Tuesday occurred marking the crashes of 1987 and 1929.

In theory, rising interest rates spell trouble for stocks, but history confirms that equity market returns have varied significantly following an initial central bank rate hike.

Dramatic and sudden declines in stock markets are both rare and painful initially. Many times, they are the final straw for quite a few investors who decide it is time to throw in the towel and head for the sidelines.

Needless to say, 2022 has not been as fruitful for investors as the previous 18 months that followed the outbreak of COVID-19. Extremely low interest rates, combined with stimulative fiscal and monetary policies resulted in an extremely rewarding period for equity investors, especially in higher risk, growth oriented investments.