Dear Valued Client,
“People who exit the stock market to avoid a decline are odds-on favourites to miss the next rally.”
– Peter Lynch, Fidelity Investments fund manager and philanthropist.
Aloni Goh Wealth Strategy Notes:
Equity markets trended higher in July as lower than expected inflation data gave hope for an end to rising interest rates. As markets are very overbought at the moment, we expect that a short term correction phase will start sometime over the next few weeks.
A corrective phase is necessary to set the stage for a year-end rally, which would not surprise us if it leads to indices hitting new all-time highs by early next year. We continue to position our portfolios for a long-term bull market.
Further Reading:
An index is said to be in a bull market when it has gained 20 percent gain from its previous lows, which the S&P500 did in June. The TSX is trending upwards though it has not technically entered bull market territory with a year-to-date return of approximately 6.5%.
The market has rallied due to a slowing of interest rate hikes and defying expectations of a coming recession that has yet to come, if at all. The job market has remained resilient, and in turn so has the economy. The rate of inflation in Canada has eased after reaching its peak, declining to 2.8% in June from 3.4% in May, its lowest level since March 2021. Observers believe that the central banks are close to their terminal rates, the final rate the Fed aims to achieve at the end of its tightening policy.
According to research conducted by forbes.com, the average bull market lasts roughly 2.7 years, and historically speaking, bull markets occur much more often than bear markets. The most recent bull market was one of the longest in history, running from 2009 to 2020, before a black swan event — the COVID-19 pandemic — collapsed the markets.
We have steadfastly remained invested in the markets with our Aloni Goh Wealth Management portfolios. When the stock markets were down, we took advantage with our bond holdings by increasing the yield to maturity and capturing yield as interest rates continued to go up. Bond prices have declined and recovered, and they will continue to recover as they are held to maturity.
Our equity positions are now poised to capture a market rally, including our exposure to the Financial sector, which has been undervalued and also resilient in spite of the collapse of the high-profile collapse of the Silicon Valley Bank in April.
As always, if you have any questions or wish to discuss whether any of the mentioned investments are suitable for you, please do not hesitate to call us at 604-658-3056 or email.
Best Regards,
Ron Aloni / Alan Goh / Jason Chen
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