For much of the COVID-19 pandemic, Canadian investors lived by a simple, stress-free maxim: stocks go up.
The S&P 500 — one of the broadest measures of the American economy — is in a bear market, down 20 per cent from its peak at the beginning of the year. Should the index fall below the 3,850 mark, reflecting a 33 per cent drop from January, RBC analysts warned clients last Monday they would take it as a sign the market was “starting to price in a recession.”
With economic uncertainty ahead, Canadians, more than half of whom have some kind of stock market equity holding, will now have to carefully navigate a tempest of volatile assets and shifting interest rates. Ryan Muise, a 37-year-old webinar moderator from Toronto, opened a Wealthsimple account at the outset of the pandemic and built a diverse portfolio of tech, cannabis and entertainment stocks, taking his investing cues from Reddit forums dedicated to day trading.
The high cost of inflation has prompted the Bank of Canada to raise interest rates, a measure to slow consumer demand by making the cost of borrowing more expensive both for consumers and businesses. Some economists, including those at major banks, fear that central bankers won’t be able to navigate the “soft landing” they aspire to achieve while interest rates rise.
Unemployment is low, retail sales are high, and Canadian households have amassed a whopping $300 billion in savings over the past two years, thanks in part to government stimulus dispersed early in the pandemic.
Artificial pandemic bubble....