4. The markets’ response: down and up
As it became clear the central banks were committed to slow the economy with rate hikes, the markets started their descent. We hit the bottom towards the end of June. It was the worst six months of the year since 1970.
July marked the start of an upward swing despite dips in the latter half of August and September.
October and November have proven to be some of the best months ever for the markets, returning portfolios to a positive for the second half of the year. In December, the markets started flat to slightly negative.
Hopefully, the markets will rally to finish off the year to conclude on a positive note, as investors started to regain what they lost during the disastrous first half of the year.
5. COVID continues to affect the markets
Even though Canada is no longer operating under a pandemic, the effects are still playing out in the labour market. Many Canadians did not return to their jobs after the initial lockdowns, and many want to keep working from home. It’s going to take a long time to fill the worker shortage that businesses are still trying to address.
6. Tech takes it on the chin—buy now
Whenever interest rates rise, it’s trouble for the tech industry. When economic growth stalls, tech stalls. That’s why we saw massive job cuts in the sector in 2022. Crunchbase News reports more than 88,000 layoffs in the U.S. tech space alone. That said, If any sector is going to provide the growth needed to cover inflation rates of 7%, 8%, 9%, it’s tech. A utility paying a 4% dividend is not going to allow you to keep up with the cost of living.
For Canadian investors, tech may be the place to go right now. Stock prices are lower, and this is where the bounce-back will likely rebound from. Microsoft, Amazon and Alphabet are all down double digits. Go to where the values are today and you will be rewarded when the economy gains momentum.
7. The 2022 Crypto crash(es)
Digital currencies lost USD$2 trillion in 2022. While the blockchain technology behind the currency is here to stay—and I think there will be some digital currencies that survive the madness—my advice to anyone who wants to invest is to be cautious. Take a very small position in your portfolio. It’s still not fully regulated—nor is it backed by a government, bank, or anything really, which means investors are in the wild west.
Allan Small
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