Canada’s stock market strength is stunningly normal

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Years,Stocks,Returns

When you realize that robust gains aren’t abnormal, you realize ‘too far, too fast’ fears are faulty

Are stocks out over their skis? With Canadian stocks up nearly 8 per cent year-to-date and U.S. stocks up almost 12 per cent, the bears see an average year’s gains already and are sure little good will come in 2024′s back half. But they’re wrong.

Statistically, average returns aren’t normal – extreme returns are normal. And so the current strength in stock markets is shockingly normal. Let me explain.. Rising 1 per cent or falling 1 per cent is similarly volatile. And over the longer term, stock volatility is your friend – hugely so more often than not. Why?

Yet stocks are rarely graceful en route. To see that, bracket together calendar year returns into these ranges: Greater than 20 per cent, 0 to 20 per cent gains, 0 to minus-20 per cent and minus-20 per cent or uglier. Looked at another way, U.S. stocks beat their 10-per-cent long-term average in 58 calendar years. They fell – at all – less than half as often, 26 times.

 

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