The Market This Month

Written by Paul Siluch
February 9^th, 2023

Markets were very strong in January, with Canada’s S&P/TSX rising over 7% and the S&P 500 up over 6%.

China is re-opening after being locked down for almost three years due to the pandemic, which will have positive implications for oil and gas (air travel is rapidly climbing, as is commuting by car), construction, and consumption. This should help to soften the recession we expect later this year over here.

There was also the issue with the “weather balloon” that was shot down last week. China and the U.S. were scheduled to meet to discuss a thaw in relations, but everything was cancelled once the missile hit the balloon.

Going forward, China will increasingly buy goods from China, Europe, or Asia at the expense of the U.S., just as the U.S. has chosen to “re-shore” many of its lost industries back to home soil. China will probably buy more planes from Airbus than Boeing and more chips from Samsung than Intel, for example.

Our globalized world is becoming more regional. In a free-trade world, the global giants that outsourced labour to the cheapest countries dominated. With borders closing, smaller local companies should benefit more.

Finally, with January’s jump, there is a lot of talk that we are in a new bull market. We don’t believe it. A new bull market requires a new set of companies breaking out to new highs, not old leaders rallying.

After the 1982 bear market, consumer companies like Gap, Wal-Mart, and McDonald’s began a decade of new highs while the 1970s leaders – oil, gold, and construction – languished. After 2009, the previous leaders - emerging markets - suffered while technology – the new leader - roared. We aren’t seeing a new group of leaders yet, but we will.